though of course factors like education and skills are important in determining how quickly and smoothly these gains come about. all speeches are available online at www. bankofengland. co. uk / speeches could this time be different? the fourth industrial revolution could differ from its three predecessors in terms of scope, scale and speed. scope thus far, each wave of technological change has increased the importance of cognitive tasks relative to noncognitive ones. in other words, machines have largely substituted for human hands not heads. workers have been able to improve their skills and take on newly created sets of cognitive, higher value tasks – tasks beyond the cognitive limits of machines. rapid improvements in computing power, the increased availability of big data and advances in artificial intelligence and machine learning mean smarter machines are already replacing a broader range of human activities than before, reaching well into the range of “ heads ”. new technologies may increasingly provide intelligence, sensory perception, and reasoning which previously only labour could provide. technological optimists believe future automation will move beyond substituting for the ‘ routine - manual ’ human tasks th technology performed in the late 20 century to almost the entire spectrum of work. it may be left to people to provide “ hearts ” – that is, tasks that require emotional intelligence, originality or social skills such as persuasion or caring for others. and if new forms of bespoke mass creativity are made possible by the new global economy, human “ hands ” may once again take over ( a form of cottage industry going full circle ). one thing that could be different is the effects of demographics. an ageing population will lead to greater demand for care and a straight decrease in labour supply. scale the greater scope of the fourth industrial revolution could mean its scale is larger too. unlike in previous episodes, the jobs most at risk of automation are likely to lie across the entire spectrum of wages. at one extreme, frey and osborne estimate that around half of us employment is at ‘ high risk ’ of automation, over an unspecified period of time. for example, brynjolfsson, e and mcafee, a ( 2014 ), ‘ the second machine age : work, progress, and prosperity in a time of brilliant technologies ’. the most extreme view of this is put forward by daniel susskind, who highlights the possibility that in the future machines can perform all tasks leading to technological unemployment ( susskind, d ( 2017 ), ‘ a model of technological unemployment ’, university of oxford, department

emergence of institutions too big to fail. and during the 21st century investor and managerial short - termism resulted in these waves reaching tsunami proportions. in 2007, this wave broke with devastating consequences still being felt today. this century - long evolution in banking occurred for understandable reasons ; it was no - one ’ s “ fault ”. but it has also unearthed a governance fault - line. ownership and control rights are exercised by shareholders. but for banks, equity is a vanishingly small fraction of their balance sheet. worse still, equity - holders often have risk - taking incentives out of line with the interests of other bank stakeholders, much less society. this fault - line lies at the heart of the imbalance between privatised returns and socialised risks. only in banking do control rights and incentive wrongs combine so uncomfortably. that calls for fundamental reform. post - crisis that has been recognised, as regulatory reform has come thick and fast. these reforms are unquestionably a step in the right direction. but if they are not to reappear, deep - rooted incentive problems in banking need to be tackled at us treasury ( 2011 ). bis central bankers ’ speeches source. i wish to argue there is unfinished business before these incentives are properly aligned with the public good. limited liability in the first half of the 19th century, the business and governance of banking was relatively simple. by the mid - 19th century, the united kingdom had around 500 banks and 700 building societies. most of the former operated as unlimited liability partnerships, the latter as mutually - owned co - operatives. 2 financial sector assets represented less than 50 % of annual gdp and the largest banks had assets of less than 5 % of gdp. bank balance sheets were heavily cushioned. equity capital often accounted for as much as a half of all liabilities, while cash and liquid securities frequently accounted for as much as 30 % of banks ’ assets. banking was a low - concentration, low - leverage, high - liquidity business. a broadly - similar pattern was evident across banking systems in the united states and in europe. this governance and balance sheet structure was mutually compatible. due to unlimited liability, control rights were exercised by investors whose personal wealth was literally on the line. that generated potent incentives to be prudent with depositors ’ money. nowhere was this better illustrated than in the asset and liability make - up of the balance sheet. the market, amorphously but effectively, exercised discipline. it was given a helping hand