It means we are better able to reflect the requirements of the firms that use the services we provide and ultimately the people of the UK. And we can balance the potentially competing needs of different stakeholders on an informed basis rather than relying only on the views of longstanding contacts. A key piece of engagement took place in summer 2018 when we ran a joint consultation10 with Pay.UK and the Payments Systems Regulator on the implementation of ISO 20022. Over 70 organisations replied and their responses11 helped refine our approach, for example on Legal Entity Identifiers (LEIs). Responses showed widespread support for making LEIs mandatory for transactions between financial institutions in CHAPS. Many respondents also saw the benefits of mandating LEIs for a wider range of payments but flagged the need for wider adoption of LEIs before these benefits could be fully reaped. The Bank has committed to working with key stakeholders including HM Government and the Global LEI Foundation (GLEIF), as well as providing further education about the wider economic value of the LEI. This will lay the foundations to make LEIs mandatory for a much wider set of CHAPS payments in the future. We are also seeking industry views on whether the renewed RTGS service could facilitate synchronised settlement and importantly what the demand might be. Synchronisation, or atomic settlement, is the concept that two or more transactions (payments or movements of assets) are linked in such a way as to ensure that each transaction completes if, and only if, they complete together.

Their relationships with sponsor banks are sometimes very ambiguous. There may be a gap between the legal commitments taken by the banks through liquidity support and credit enhancements, and the “true” level of responsibility they felt obliged to take to protect their reputation. This conjunction of complexity and fragility may have been too much for the system to bear. So it is worth to pause and ask ourselves whether we can eliminate those vulnerabilities and still keep the benefits associated with securitization, especially in terms of financial innovation. One good starting point is to look at the economic and financial rationale for securitization. Securitization is meant to perform two functions: the first, and most "advertised" in recent years, is to allocate and distribute risks, hopefully to those agents and investors best equipped and most willing – to carry it. The "slicing and tranching" process allowed banks to offload credit risk from their balance sheets and transfer it to other financial investors. But, historically, securitization is borne out of the more simple desire to shortcut banking intermediation by using markets to directly match the needs of lenders and borrowers. Since both have different liquidity preferences, this usually involves the issuance of tradable – i.e. liquid-securities which can be sold to the ultimate investors. Thus, a well functioning securitized system would meet two characteristics: (1) allow for a permanent reallocation of risk between market participants according to their preferences, expectations and risk aversion; and (2) make liquidity (market liquidity) permanently available throughout the system.