andrew bailey : loughborough lecture - banking today loughborough lecture by mr andrew bailey, governor of the bank of england, at the loughborough business school, loughborough, 12 february 2024. * * * it's an enormous pleasure to be here at loughborough university this evening. i can give you three reasons for this, it's not just the polite thing to say at the beginning of a lecture. in order of importance, i am going to start with david llewellyn. david is very modest, you have to search quite hard to find out that he has been professor of money and banking here since 1978. to say the least, that is impressive. david has been a leader in the field throughout that time. he has had many students, and he has provided the bank of england with many of our excellent staff. as well as a big thank you, david, i think we must start planning your 50th. the second reason for the pleasure this evening is to continue a tradition of bank governors giving lectures here at loughborough. robin leigh - pemberton did so in 1986, and eddie george ten years later in 1996. the gap has been 28 years this time, but i can lay claim to a bit of continuity because in 1996 i was eddie's private secretary, and i had a bit of a hand in writing that lecture. the third reason for the pleasure is that i am a native of leicestershire, leicester itself to be precise. and, i have good memories of visiting loughborough. one particular memory is that i saw my first county cricket game here, a sunday league game between leicestershire and nottinghamshire in 1970. so, it's good to be here. this evening, i am going to focus on banking, and particularly on issues that, looking forwards, are important both for banks themselves and for broader monetary and financial stability. i am going to start with an important and very positive point. the last four years have seen major macroeconomic disruptions that we have had to work through. but, they have not created disruptions to the uk banking system, and thus to financial stability, of the sort that we have seen in the past. this time the banks have supported the economy through lending not the other way round, and that's how it should be. so credit where it's due – sorry for the pun. this point on lending to support the economy is important. in his 1986 loughborough lecture, robin leigh - pember

should happen is that competition within the banking system should exercise the strongest influence on returns. the subject of deposit runs brings me to the next issue i want to cover this evening. while i said that the uk banking system has to date come through recent economic shocks well, and i expect it to continue to do so, last year did see some major events among banks elsewhere. march last year was quite a month. it reminded us never to take stability for granted, and pointed to how some of the features of bank problems have evolved. the most prominent, i think, was the speed and scale of bank runs. traditionally, if we can use that word about bank runs, banks have not lost, say, 25 % of their deposits in one day. as a case in point, northern rock lost on average around 5 % in one day. sadly, for those of my age anyway, in star trek mr spock never said " it's life jim, but not as we know it ". but for someone like me who has seen a few bank failures, last march had that sort of feeling to it. except that, of course, it is life, and we do now know it. it's life with digital technology – both digital banking and payments and digital communications. confidence in a bank can be lost, and runs can be effected and spread at a speed that was unknown in the past. queuing in the street is not required. so, bank liquidity and runs are subjects of the moment again. i want to step back briefly at this point and try to answer the question, but is liquidity really the issue in such cases, isn't the solution to be found elsewhere? yes and no is my answer to that. the question of whether bank failures are caused by liquidity or solvency problems is as old as the hills, and has chicken and egg like characteristics. i remember the ceo of a bank experiencing a run telling me that their bank was the best capitalised in the country, to which my response was to ask in that case why the depositors were heading for the doors? in my experience, runs mostly point to a solvency problem, though it may be one ahead rather than one visible today, that is the nature of a loss of confidence. 5 / 9 bis - central bankers'speeches but beyond that, even if a run is a symptom, it has to be dealt with in order to stabilise the problem and allow