The MPC’s remit is broadly the same today – it aims to return inflation to the 2% target while avoiding unnecessary economic costs. Another critical event was the Global Financial Crisis (GFC), which had similarly fundamental implications for the Bank. One lasting image of that crisis is of queues outside branches of a high street bank – Northern Rock. I worked on the Bank’s response – providing liquidity support to Northern Rock as depositors withdrew their cash. In the event that was just the beginning of the crisis. One year later, the US investment bank Lehman Brothers had defaulted and confidence in the financial system had collapsed. As a consequence we saw a credit crunch and economic costs on a huge scale. There were many lessons learned from the GFC. One was that monetary stability is not a sufficient condition for financial stability – more was needed. We needed macroeconomic policymakers to take account of ‘systemic risks’ in the financial system. That means understanding that total risks in the system might be larger than the sum of their parts. Why? Because these risks can amplify each other, particularly in times of stress, and as they do so can harm economic growth. In the UK,  Page 3  this realisation led to the creation of a new committee with clear responsibility for the stability of the financial system as a whole – the Financial Policy Committee (FPC) on which I sit today. The FPC’s primary objective is to pursue financial stability.

The views expressed here are not necessarily those of the Financial Policy Committee. References Aikman, D., J. Bridges, S. Hacioglu Hoke, C. O'Neill, and A. Raja. (2019a). “Credit, capital and crises: a GDP-at-Risk approach”. Bank of England Staff Working Paper No. 824. Aikman, D., P. Chichkanov, G. Douglas, Y. Georgiev, J. Howat and B. King. (2019b). “Systemwide stress simulation”. Bank of England Staff Working Paper No. 809. Allen, W. A. (2022). “Models of Central Banking and the Organisation of the Bank of England”. Available at SSRN 4283767. Altunbas, Y., L. Gambacorta and D. Marques-Ibanez (2014). “Does Monetary Policy Affect Bank Risk?”. International Journal of Central Banking, 10(1), 95-136. Aramonte, S. and P. Rungcharoenkitkul (2022). “Leverage and liquidity backstops: cues from pension funds and gilt market disruptions”. BIS Quarterly Review, December. Bailey, A. (2022a). “The economic landscape: structural change, global R * and the missinginvestment puzzle”. Speech at the Official Monetary and Financial Institutions Forum. Bailey, A. (2022b). “Monetary policy and financial stability interventions in difficult times” Speech at the G30 37th Annual International Banking Seminar, Washington, D.C. Balls, E., J. Howat and A. Stansbury (2018), “Central Bank Independence Revisited: After the financial crisis, what should a model central bank look like?”. Harvard M-RCBG Associate Working Paper No. 87. Baranova, Y., G. Douglas and L. Silvestri (2019). “Simulating stress in the UK corporate bond market: investor behaviour and asset fire-sales”. Bank of England Staff Working Paper No. 803. Bean, C. (2010). “Joseph Schumpeter Lecture The Great Moderation, The Great Panic, and The Great Contraction”.