##40bn of misconduct costs. these costs were calibrated to have a low likelihood of being exceeded and are therefore, by design, much larger than the amounts already provided for by banks. second, the esrb has also proposed tackling misconduct at source by increasing individual accountability. this can be done by reforming remuneration – using variable pay, combined with malus and clawback, to hard - wire stronger incentives for good behaviour within firms. the uk is committed to this approach with the toughest remuneration regime in the eu, including the longest deferrals and claw backs. however, the effectiveness of such measures across the eu is being tempered by the bonus cap. for example, in 2013, the ratio between fixed and variable for material risk takers at major uk banks was around 1 : 3 – meaning three quarters of remuneration was at risk from individual misconduct. the next year, when firms first had to apply the bonus cap, that ratio had fallen to around 1 : 1, with the overall level of remuneration unaffected. prompted by the esrb, the fsb is now examining the impact of various compensation tools on misconduct, and if appropriate, it will recommend improvements to next year ’ s g20 summit. reforms to compensation are necessary but not sufficient. esrb reports have rightly stressed that more should be done to hold senior individuals to account. prompted in part by the esrb, the fsb members will share experiences on the role of bank regulatory powers to address misconduct and on approaches to enhancing individual accountability. in the uk, we are implementing a new regime to ensure senior managers right across the financial system are held directly accountable for failures in their areas of responsibility. that will be buttressed by clear code of conduct, designed by practitioners, to ensure high standards are understood by all. 4. conclusion all member states, and more fundamentally all eu citizens, have a stake in eu financial stability. the esrb helps deliver this foundation of prosperity. the financial crisis starkly illustrated how quickly risks could spill across borders, the need for wide - ranging reforms, and a new approach to addressing risks. with your leadership, the reform programme is substantially complete, and authorities are now implementing it to maximise its effectiveness. bank of england survey results. respondents were asked for their views on the statement ‘ i believe that financial markets work in the interest of society ’. possible responses were : strongly agree, agree, neutral, disagree, strongly disagree. only one third

taking and payments services that must be continuously supplied to uk households and small firms will be protected in ring - fenced banks ( rfbs ). groups operating across borders will also include non - ring - fenced banks ( nrfbs ) and will need to be resilient according to their global footprint. resilience requires systemic capital buffers both at the domestic and global level. the domestic buffer applies to the rfb whereas any global buffer applies to the whole group. the rfb and nrfb shares of capital should provide sufficient resilience for each. so if the size of the domestic buffer risks leaving the rest of the group with too small a share to be resilient against shocks, we will increase the group ’ s buffer to prevent this from happening. these complexities do not just flow from ring - fencing but from the international reach of many uk banking groups. we set their consolidated requirements as home supervisor. overseas regulators ( as host see the pra ’ s approach to the implementation of the systemic risk buffer : statement of policy ; 5 december 2016. all speeches are available online at www. bankofengland. co. uk / speeches embargo : not for release before 19 : 30 on wednesday 4 october 2017 authorities ) use their own rules to set requirements for the subsidiaries in their territories. they might consider these businesses to be systemic on a local basis. they might measure financial transactions under different accounting rules, apply different prudential approaches to assessing risks, or restrict capital transfer to the uk parent. therefore, a uk bank ’ s overseas subsidiary might be required to have an outsize portion of its group ’ s capital. back at home, the parent might fund the subsidiary ’ s higher capital requirement by raising debt externally. this is known as ‘ double leverage ’ and firms use it because debt is generally cheaper than equity. but servicing double leverage relies on flows of dividend income which are uncertain and at the discretion of local boards and supervisors across the group. or the parent might be incentivised to under - allocate resources to unregulated but risk - taking entities within the group. we need to be mindful of the risks this can create, and so today we are announcing a new approach, to ensure that uk banking groups are at least as strong as their parts. subject to our consultation : we will expect firms to demonstrate to us that they can manage the cash - flow and other risks associated with double leverage. and we will