16 Haldane (2017b). 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Golden Age of central banks, speculating on whether “peak central bank” had been reached. Some asked openly whether central bank independence was appropriate, at least on financial stability matters. I am not as pessimistic or as fatalistic as that. But I do think some of those concerns about understanding, trust and legitimacy are real. In response to them, new efforts may be needed to close the understanding and trust deficits and bridge the transparency and accountability gaps. Doing so would, I believe, leave central banks even better-informed and better-placed to deliver their core mandates in future. Here is why. Correcting the Deficits  My answer comes in two, inter-related, parts. Let me take these in turn. First, building understanding among the general public in the economy, financial system and central banks. Most people would think an improved understanding of the economy among the general public is desirable. It makes for improved decision-making by people on important everyday decisions on spending, saving, borrowing and working. The better those individual decisions (the micro), the more stable the economy and financial system are likely to be (the macro). Improved public understanding of the economy is in that sense win-win, benefitting policymakers and the public alike. But it is possible the benefits of improved public understanding in stabilising the economy and financial system have been underestimated. “Popular narratives” among the public might be more important in driving macro-economic behaviour than in the past.

One of the by-products of the new technology is that it does enable banks to measure risk more precisely. The Committee intends therefore to exploit this by enabling banks to use an internal ratings-based approach to calculate the credit risk for various types of borrowers and consequently the amount of capital they need to hold. Less sophisticated banks will use a standardised approach where the risk weightings for various classes of borrower will be determined by external credit ratings. One feature that is particularly relevant to today’s discussion is that for the first time there will be an explicit capital charge for operational risk. This seems to be a timely move given the increased operational complexity introduced by technological change. The new Accord will be unveiled for further consultation at the beginning of next year. Although its implementation is still a few years away, I would strongly advise banks to start to prepare for it now, for example by upgrading their loan classification systems and beginning to measure and monitor operational risk. The new Capital Accord will be relevant not only to capital requirements but also to the pricing of risk. If regional banks wish to remain competitive with the global players operating in their territories, they will need to become more conscious of return on capital and the need to economise on the use of capital. There is one other aspect of the changing environment to which I believe banks should pay closer attention. This is what might be termed the rise of the consumer.