Financial intermediaries are often more focussed on short-term earnings than private investors, and more likely to move capital in the event of anxiety or problems. There is therefore a risk, although this should not be exaggerated, that increased institutional ownership will reinforce herd behaviour and lead to larger fluctuations in prices in the financial markets. Increased institutional ownership also means that the passive owners will have relatively substantial influence over the companies. In most cases, the mutual fund companies do not participate in the management of the various companies. This in turn means that corporate governance issues gain in significance. What ability and interest do the mutual fund companies have in influencing management to participate in the board work of the limited companies? In recent years, mutual fund companies and other institutional owners have shown slightly greater interest in the work on management of these companies. However, an interesting question of principle here is what mandate they have for this. The primary goal for a unit trust investor ought to be to achieve the highest possible yield at a given risk level. It is not necessarily in the interests of the mutual fund investor for the mutual fund company to conduct corporate governance. However, from the point of view of the economy as a whole it is important that there are owners who can actively govern the companies.

Indeed, more data was created in the past two years than in all the years that came before.5 And this data is creating enormous opportunities for the new finance to serve customers better and to manage risks more effectively. To those ends, the financial sector is investing heavily in the Cloud, Machine Learning and AI. Banking is already the second biggest global spender on AI systems (after retail) and is expected to invest a further $ on AI by 2020. AI-enabled solutions are increasingly important in fraud detection as well as automated threat intelligence and prevention. As some in the audience are exploring, there is also significant potential in credit assessments, wholesale loan underwriting and trading. As my colleague James Proudman recently described, such advanced analytics are also likely to lead to changes to the way the Bank conducts supervision.6  3  Supervisory Statement 3/19. Available at: https://www.bankofengland.co.uk/prudential-regulation/publication/2019/enhancing-banksand-insurers-approaches-to-managing-the-financial-risks-from-climate-change-ss 4 Network for Greening the Financial System; First Comprehensive Report 17 April 2019. Available at: https://www.banquefrance.fr/en/financial-stability/international-role/network-greening-financial-system/first-ngfs-progress-report 5 See https://www.domo.com/solution/data-never-sleeps-6 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  The PRA promotes safety and soundness based upon forward-looking, judgement-based supervision, in which we identify the key risks facing firms and set supervisory strategies to mitigate them. As a process, it can be broken down into three simple steps: 1) rule-setting and reporting; 2) analysis and monitoring; and 3) setting and communicating a supervisory strategy to mitigate identified risks. Each of these aspects of supervision is amenable to automation, machine learning or AI to some extent.