mark carney : the european union, monetary and financial stability, and the bank of england text of the cairncross lecture by mr mark carney, governor of the bank of england and chairman of the financial stability board, st peter ’ s college, oxford, 21 october 2015. * * * i would like to thank ben nelson and iain de weymarn for their assistance in preparing these remarks, and aaron clements - partridge, rashmi harimohan, david ronicle, thomas smith, james talbot, ryland thomas, nicola anderson, phil evans, richard blows, george murphy, mike flood, peter nagle, nicola shadbolt, sinead meany, jumana saleheen, dennis reinhardt, bob hills and siobhan clark for their work preparing eu membership and the bank of england. 1. introduction it is a great honour to give this cairncross lecture in wren ’ s exquisite sheldonian theatre. sir alec cairncross was a celebrated economist whose career bestrode public service and academia. born to a lanarkshire ironmonger in 1911, he rose, via glasgow university and cambridge, to serve as the first head of the government economic service and later, much more illustriously of course, as master of st peter ’ s college. his work serves as a reminder of how enduring are the most trying economic questions we face. his phd thesis, eventually published after great anticipation in 1953, concerned british investment at home and abroad during the last great wave of globalisation – a golden era for global commerce that stretched from canadian confederation to the eve of the great war. 1 his professional preoccupations included how international capital flows, trade and labour mobility influence people ’ s well - being. these factors remain uppermost in policymakers ’ minds as they seek to secure the resilient dynamism we all need for sustainable prosperity. and they are among the factors i want to consider this evening in discussing the impact of the uk ’ s european union ( eu ) membership on the bank of england ’ s objectives. today we are publishing a report that examines this question. 2 i would like to be clear at the outset what this report is about, and what it is not. our report is solely concerned with how eu membership affects the bank ’ s ability to achieve our core objectives of maintaining monetary and financial stability. it is not a comprehensive assessment of the pros and cons of the united kingdom “ being in europe. ” and for

mcdougall ( and others like him ), introduced a speculative spirit that threatened the more sober motives crucial to indemnification contracts 9. 4 statutes of the realm 978 ( 1547 - 1624 ). lewin ( 2003 ). clark ( 2004 ). bis central bankers ’ speeches practices such as those described above ultimately led parliament to take action. this first took the form of the marine insurance act 1745, which rendered void marine policies made without an insurable interest. a similar provision was subsequently applied in relation to life insurance under the life assurance act 1774. these acts did leave a gap – namely, nonmarine indemnity policies. however this was filled when gambling contracts were rendered void by the gambling act 1845, as the existence of an insurable interest served to distinguish insurance contracts from gambling contracts. this was not the first time that parliament had concerned itself with the affairs of insurance companies, however. in 1739, britain entered into a war with spain. as a consequence, trade with spain ceased but – perhaps surprisingly – the underwriting of spanish ships by british underwriters continued unabated. this led to a somewhat perverse situation in which british insurers compensated enemy merchants for shipping losses suffered at the hands of british privateers and squadrons of the royal navy. the value of insurance trade was, it seems, considered by many to be too valuable to forfeit voluntarily 10 as britain entered a period of sustained warfare with spain and then france. by 1748, attitudes had changed and parliament passed an act which banned the insurance of enemy ships by british insurers. yet the act was expired just a few months later ( after the seven years war ended ) such that insurers did, in fact, enjoy considerable discretion over which risks to underwrite, including foreign enemy ships. i think that what this example ultimately demonstrates is the importance of trade and competitiveness in shaping the british state ’ s involvement in the affairs of insurers. the protection of enemy ships was at direct odds with britain ’ s foreign policy – but trade was ultimately considered strategically more important. in common with the environment in which our eighteenth - century forebears worked, trade and competitiveness remain important contextual factors in the debate about how we should regulate insurers today. indeed, it is useful to remind ourselves that these debates about competitiveness have been a feature of the state - business nexus around insurance for several hundred years. so, i think that we can see in this phase the emergence of