citizens in service, not people in power speech given by alex brazier, executive director for financial stability strategy and risk, bank of england member of the financial policy committee at allen & overy, london friday 17 may 2019 i am grateful to hugh burns, james howat, kiman bassi, jonathan bridges, emma moriarty, emily clayton, james hurley, guy debelle, ben broadbent, martin taylor, alina barnett, dimitri demekas and paul tucker for helpful discussions. the phrase ‘ citizens in service ’ is also used by tucker in his book ‘ unelected power ’ ( 2018, page 546 ). all views, errors and omissions are my own. all speeches are available online at www. bankofengland. co. uk / speeches i ’ d like to express my thanks to allen & overy for hosting this event and for bringing together such a formidable crowd to discuss these issues. more than a decade on from the financial crisis, memories can begin to fade. they must not. because the crisis was a disaster : leaving a legacy economic cost equivalent to about £20, 000 per person. 1 like all disasters, it should be memorialised so that future generations are not destined to repeat the past. it ’ s sometimes argued that the crisis happened because nobody spotted that the system was heading for the rocks. i think the causes run deeper than that. they centre on a collective failure to take the long view. the financial system lived for the moment. those that reaped profits and bonus today but would be bailed out tomorrow had every incentive to live for the moment and figure out the rest later. that may not have mattered so much if regulation of that system had taken the long view and had prepared it for bad times, whenever they came and whatever caused them. but it didn ’ t. the report into the failure of the royal bank of scotland, describes a pre - crisis regulator – the financial services authority – responding to political demands from all sides of the debate for ‘ light touch ’ regulation2. the result was a financial system that lived for the moment. it relied on the economic good times continuing to roll. and so, like a city built with no building standards on a fault line, it crumpled dangerously with the first economic tremors. it wasn ’ t the failure to spot the particular coming earthquake that was the real problem. it was the failure to think about the long term. a failure to acknowledge that a quake

entries continue to rise gradually ; and the composite state - of - the - economy index for the first few months of the year was retroactively revised upwards last week by the bank of israel. hence, the picture that emerges regarding economic activity in the first few months of the year does not justify changing the bank of israel's forecast of 4 percent growth for 2005. this situation of a growing economy with economic and financial stability did not come about by chance. it is the result of a correct macroeconomic policy, in particular of monetary policy that focuses on stability, and without jeopardizing it, helps growth, combined with fiscal policy that operates within the framework of long - term fiscal discipline alongside structural reforms that support growth. as far as fiscal policy is concerned, i am in favor of the ministry of finance program to reduce taxes ; care must be taken to ensure that during its implementation special attention is paid to the welfare aspects of the program, and that the government debt and its high share in gdp continue along their downward path. i would like to turn now to two important issues facing us, and which the finance committee will also have to deal with : the recommendations of the bachar committee, and the bank of israel law. with regard to the bachar committee, i would like to make it perfectly clear that i support the proposed reform of the capital market along the lines recommended by the committee. the high degree of concentration in the capital market has an adverse effect on economic growth and efficiency. it is very difficult to pursue a policy of economic reforms without dealing with this issue in a thorough and comprehensive manner. the proposals of the bachar committee offer a good solution to the problems of concentration afflicting israel's capital market. most of the credit market is in the hands of the banks, and although nonbank credit has been expanding recently, the rate at which this is happening still leaves the bulk of credit within the banking system. there are certain detailed aspects of the reform that are still being addressed. but the question to be asked is whether after the reform the situation in the capital market will be better than before. if the answer is " yes, " then we must go ahead and implement it. in this case my answer is a definite " yes. " the second vital issue, and to the bank of israel this is the first issue, is the bank of israel law. i would like to state at the outset that despite the fact that the bank has been operating for 50 years