For example if the international standards are not designed with certain business models in mind, to reflect the advance of new technologies and to reflect new risks and opportunities. I have spoken at length elsewhere about the benefits of dynamism, so will not dwell on this more here.4  The second feature the institutional structure should have is time consistency. Time consistency is perhaps best understood by describing its opposite, time inconsistency. Public policy suffers from time inconsistency when there is a conflict between a policymaker’s shortterm incentives and their long-term incentives. In the context of prudential regulation, over the long run, a policymaker wants to avoid financial crises. Robust prudential standards are the means of achieving this. In the short term, however, there may be benefits from weakening prudential standards. For instance, a government might benefit electorally from the resulting short-term boost to credit supply. There is empirical evidence for this happening in practice. 5  But the long-term consequence of always acting on those short-term incentives is an unstable financial system. The benefits of time consistency have been long recognised in monetary policy. Finally, the structure will need to have legitimacy. 3  https://www.bankofengland.co.uk/speech/2019/sam-woods-ubs-20th-annual-financial-institutions-conference-lausanne. See https://www.bankofengland.co.uk/speech/2018/victoria-saporta-speech-at-the-westminster-business-forum-keynoteseminar and https://www.bankofengland.co.uk/speech/2019/victoria-saporta-speech-at-risk-net-liquidity-and-funding-riskeurope . 5 See Antoniades and Calomiris (2018) and Dagher (2018). 4  I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 3  To achieve this, the regulatory authority needs to be given a mandate.

This involves cross-border trade and financial interactions between countries, with flows of goods, services or information at increasing volumes and velocities. It is akin to interactions within a social network or across the World Wide Web. At least in principle, each of these individual layers could be complex. These layers are also likely to interact. For example, there are likely to be strong interactions between the financial system and the macro-economy and between individual national financial systems and the global financial system. This coupling between sub-systems adds to the degree of complexity of the system as a whole. Let me present some stylised facts on each of these layers, from microscopic through telescopic, to illustrate why each has the characteristics of a complex sub-component. I will also present some evidence on interactions between these sub-systems, which means we have a genuine macro-financial system of systems. (a)  Complexity among individual firms  There is no off-the-shelf measure of organisational complexity, whether within banks or more generally, but a number of proxies have recently been constructed. For example, the Basel Committee has recently devised a range of complexity metrics for the world’s so-called SIFIs – systemically important financial institutions. 7 So far, 30 institutions globally have been designated by the Financial Stability Board (FSB) as SIFIs, from across a range of countries.