Page 4  Normalisation of the monetary policy stance With the failure of Lehman Brothers in 2008, policy rates across the world were reduced quickly and substantially, generally being floored at what were then seen as their effective lower bounds. Additional monetary easing was then provided through large-scale asset purchases or quantitative easing (QE). The resulting very supportive overall stance was justified by the emergence of downside risks to inflation targets, a weak economic outlook and tensions in the financial system, all of which had emerged in the aftermath of the financial crisis. Although the details varied from one jurisdiction to another, this very supportive monetary policy stance was maintained for the bulk of the next decade: through the euro area sovereign crisis, through the challenges of Brexit, through the Covid pandemic and its aftermath. This prolonged period of policy support was exceptional. To give a sense of this: when I joined the MPC in September 2021, the Bank of England’s policy rate – Bank Rate – was at the lowest level seen during the Bank’s more than three centuries of existence. And – at least in absolute nominal terms – the Bank’s balance sheet was larger than it had ever been. As the recovery from the pandemic became better established and risks to inflation became first more balanced, and then shifted to the upside, the need to normalise the monetary policy stance became evident across many jurisdictions, including in the UK. This has been an important driver of monetary tightening over the past year.

Surveillance has been and will be intensified to detect vulnerabilities that may emerge in this period of uncertainty. As such, the financial institutions as well as the designated non-financial businesses and professions, or the DNFBPs, must be ready to respond to emerging risks and threats. These risks and threats include money laundering and terrorism financing that may undermine the efforts undertaken to maintain financial stability. For this purpose, it is apparent that the efforts to further strengthen the AML/CFT regime need to be intensified. Individual countries may benefit from robust AML/CFT regimes as enhanced financial sector integrity and stability facilitates their integration into the global financial system. They will also contribute to more transparent governance and effective fiscal administration. At the international level, there is renewed interest to review policies relating to banking secrecy and transparency, which are two of the factors identified to have contributed to the current financial meltdown. In this regard, the Financial Action Task Force (FATF) has initiated a study to assess the effectiveness of its policy tools in response to the current financial and economic crisis. The FATF is now identifying policy tools which may need further strengthening and evaluating whether new policy tools or responses may be needed to meet any new challenges. This is an opportunity for us to provide feedback to the FATF on its 40+9 Recommendations, including implementation challenges. Against this backdrop, the theme of this conference, “Strengthening Vigilance During Turbulent Times”, aptly describe what I believe should be considered by every institution during this challenging times.