I wanted to speak to this, not to continue the debate about the rights and wrongs of this case, but instead to highlight some of the lessons that the Bank and industry might draw from it. In particular, I want to dispel the urban myth that has developed around these events. While the Prudential Regulation Authority (PRA) can impose financial penalties and suspension under the SMR, we do not run for our regulated entities a disproportionate “one strike and you are out” regime for an honest mistake. Neither explicitly nor implicitly. Not I as Governor, not the CEO of the PRA, not the head of the FCA. Not any of our supervisors in the PRA. The SMR is about clear responsibilities, proportionate consequences, and developing a culture of openness and accountability. Proportionate means taking into account the severity of the incident, the track record of the individual and their firm, as well as the firm’s wider response. An honest mistake that is freely admitted for which a firm takes prompt remedial action is not a firing offence. And here’s my point: we must not let recent events inadvertently tighten perceived standards for the industry because that could have Senior Managers running scared, drive compliance underground and undermine 12  For TSC report see: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmtreasy/.../1092.pdf  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  our collective objectives. Another risk, flagged by some, is that it will also become harder to find candidates of sufficient calibre willing to take on senior roles.

It requires the consent of society in order to operate, innovate and grow. Repeated episodes of misconduct have called the social licence of finance into question. In a system where trust is fundamental it ought to be of grave concern that only 20% of UK citizens now think that banks are well-run, down from 90% in the late 1980s. 4  1  For example, their capital requirements have increased 10-fold. And in response these banks have raised over $ trillion of capital in recent years. 2 There are multiple root causes: (i) market structures presented opportunities for abuse and were vulnerable to conflicts of interest and collusion; (ii) systems of internal governance and controls were incapable of asserting the interests of firms – and society – over those of staff; (iii) compensation packages rewarded short-term returns and ignored long-term value creation and good conduct; (iv) and dearth of personal accountability. 3 For misconduct costs see BCG report, “Global Risk 2017: Staying the Course in Banking, March 2017 http://www.bcg.com/publications/2017/financial-institutions-growth-global-risk-2017-staying-course-banking.aspx. Estimates of the impact on lending capacity are Bank of England calculations. 4 British Social Attitudes Survey (2013). 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  From ethical drift to ethical lift  The scale of these shortcomings is why the Bank of England has been pursuing a series of measures to convert ethical drift into ethical lift. Domestically we are working closely with the Financial Conduct Authority (FCA) and HM Treasury.