We would have been attentive to the opacity around the ABS market; and to the cliff effects stemming from mechanistic reliance on rating agency ratings by banks, investors and regulatory regimes. And, finally, I trust that we would have been more exacting in following up the early-2000s’ G10/Financial Stability Forum report on the difficulties of resolving Large Complex Financial Institutions. Some of those interventions would have addressed long-standing structural faultlines in the global financial system. Others, perhaps more speculatively, would have been contingent on cyclical conditions. For example, a respectable macroprudential authority would ideally have tightened banks’ capital requirements against exposures to property and to shadow banking. Perhaps more compellingly, I think a macroprudential authority equipped with powers to do things would at least have asked whether the system was sufficiently resilient given a pervasive sense, from the market itself, that risk was underpriced. BIS central bankers’ speeches  7  Lo and behold, the sphere of influence of the FPC will come via both “structural” and “cyclical” instruments.7 Once the legislation is in place, the FPC will be able to make Recommendations, on a “comply or explain” basis, to the Prudential Regulation Authority and to the Financial Conduct Authority (the planned securities markets-cum-consumer regulator) on their rules and policies. And the FPC will also be able to Direct the microregulators to take certain kinds of action, to be set out in secondary legislation; that is so that our Parliament decides the spheres in which the microregulators will be obliged to follow the FPC’s lead.

The maximum bid amount and rate have varied over the life of the exercise in order to ensure usage sufficient to generate useful observations about counterparty demand under various market conditions during the testing period; however, as authorized by the Committee, they cannot exceed $ billion per counterparty and 5 basis points, respectively.18 It bears emphasizing once again that, like the Federal Reserve’s other  16  The facility does, however, raise new collateral management issues for the Desk, which would have to ensure that SOMA securities are appropriately allocated to meet policy and operational needs across multiple operations. 17  The Desk has been conducting periodic, small-value term reverse repo exercises with its expanded counterparties through tri-party arrangements since October 2009. These exercises have been limited to $ billion in total amounts outstanding and have been conducted according to the traditional, fixed-quantity model of Desk operations. In August 2013, the exercises were arranged for same-day settlement and overnight maturity in anticipation of initiating overnight fixed-rate reverse repos. 18  All 139 counterparties are eligible to participate, but they are able to choose whether they do so. Each counterparty was initially limited to a maximum bid of $ million. This amount was raised to $ billion on September 26, after we ensured that the initial launch of the exercise did not operationally overwhelm the  8  BIS central bankers’ speeches  operational readiness exercises, this one is a matter of prudent advance planning.