This review will include ‘the need to ensure financial stability is delivered through an effective regulatory framework, with the responsiveness necessary for a dynamic and open financial services sector and an appropriate level of democratic accountability’.1 The first stage of that review, focused on regulatory coordination, was launched in July 2019.2  Ultimately, the design of the post-EU regulatory framework will be for  Parliament to decide in due course. 1  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785618/WMS_final_Commo ns.pdf. 2 For more detail on the review, see https://www.gov.uk/government/consultations/financial-services-future-regulatoryframework-review. I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 2  Last year Sam Woods set out a set of principles to which any future UK regulatory framework should adhere. This speech builds on these principles to propose an ideal framework from the perspective of achieving the Bank of England’s objectives. 3 It then looks at whether the existing empirical evidence, including some new research carried out recently by colleagues in the Bank, supports the framework. Ideal features of the institutional structure of prudential regulation Sam Woods’ six principles of regulation are shown in Figure 1. In building the framework, I start by mapping these principles to three ideal features of regulation also depicted in the Figure. The first feature is that the structure needs to have dynamism. By this, I mean adjustments made to regulation over time to incorporate updated international standards in a timely manner, including to adjust for any unintended consequences of regulation.

Following the financial crisis, the model for prudential regulation in the UK has been further developed by the establishment of the Financial Policy Committee (FPC) and the Prudential Regulation Authority (PRA). The mandates for both the FPC and PRA are set out in primary legislation: the FPC is responsible for protecting and enhancing the overall stability of the UK financial system; and the PRA’s primary objectives are to promote the safety and soundness of regulated firms and to contribute to the securing of an appropriate degree of protection for policyholders. But importantly, the mandates for the FPC and PRA ensure that other factors such as long-term productivity and economic growth are taken into account when setting policy. The FPC must pursue its financial stability objective without causing serious harm to the wider economy in the medium or I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 6  long term. In other words, the FPC must avoid the ‘stability of the graveyard’. 6 And, the FPC also has a secondary objective, subject to its pursuit of its primary objective: that of supporting the economic policy of the government. The PRA also has an important secondary objective to facilitate effective competition, and must have regard to a set of regulatory principles, including the desirability of sustainable economic growth.