REMARKS ON FINANCIAL REFORM
My Lord Mayor, Ladies and Gentlemen. Can I thank you Lord Mayor on behalf of the Bank of England for inviting us to contribute to your regulatory Banquet. Adair and I first met in our current roles when he was literally I think in his first day on the job, which was incidentally the weekend of the resolution of Bradford and Bingley. It is a great relief that the experience of that weekend did not cause him to have second thoughts, because we have all benefited from the leadership that he has provided since then. On the subject of the time of year, I should add that being here in September, enjoying your hospitality Lord Mayor is a distinct improvement on some recent Septembers when we were recovering banks. An evening at Mansion House beats the pizza and all night session at the Bank of England by a very long way.
I am going to speak tonight about why the public interest in the stability of the financial system matters to all of us. Calmer times are the necessary environment for the task of re-building financial stability. It is a task that belongs to all of us, and it is certainly not just the task of regulators, central banks, or the authorities more generally. We cannot achieve and maintain financial stability on our own. Above all, it requires recognition of the public interest in financial stability.
Thirteen years ago, at the annual banquet for the Bankers and Merchants of the City, in June 1997, just over a month after the Election of that year, commenting on the new regulatory arrangements, the then Governor of the Bank, Eddie George, said that the direction of financial services regulation was driven in part “by a rising tide of public expectations in terms of both the prudential and the behavioural standards required of financial intermediaries”. Eddie George was undoubtedly correct that the public will and should expect more in terms of the standard of business of firms. But history now tells us – painfully – that on the way to higher standards there was a terrible lapse in which too many people in our industry forgot that preserving financial stability is the duty that we all owe to the public. The fact of the matter is that the public has every right to expect us to act in their interest.
This means that we cannot have attitudes which put short-term gain first on the basis that the stability of the financial system can be tomorrow’s objective, for the next person. But in order to achieve this, we need to be very clear on the benefits of financial stability. One of the questions I get asked most frequently is how we will ensure that the lessons of the crisis stick. We can only achieve this if the case for financial stability is well understood.
For the full speech see: http://www.bankofengland.co.uk/publications/speeches/2010/speech447.pdf
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