jon cunliffe : macroprudential policy – from tiberius to crockett and beyond speech by sir jon cunliffe, deputy governor for financial stability of the bank of england, at thecityuk, london, 28 july 2015. * * * historians still argue about the exact causes of the financial crash of ad 33 that rocked the roman empire. the commentators of the day did not unfortunately have, let alone record, the vast amounts of data that we have become used to today. but in a world still painfully extricating itself from the crash of 2008, the key features look eerily familiar, as a number of modern day commentators have observed. an extension of credit across the empire, a sudden deleveraging, debtors failing and bank closures in a number of roman provinces, the total drying up of liquidity in the financial system and widespread panic. the remedies look familiar too. the emperor tiberius was not able to rely on a modern independent central bank with the ability to print money to staunch the crisis. but notwithstanding that immense shortcoming, tiberius took effective action, injecting into the system a huge amount of liquidity stored in coin in his treasury, setting interest rates at zero for a three year period – an early example of forward guidance – and doubling loan to value requirements for property loans. he also executed those he thought most responsible : though some might advocate that today, i think in that respect at least we have moved on from ad 33. systemic financial crises, as this episode shows, are not new. the invention of credit and the development of banking and financial systems have been key to the improvement of human living standards throughout history. but they bring with them the boom and bust extremes of the credit cycle, driven by greed and fear, and the risk of systemic crises which can badly damage the real economy. as financial systems have developed and spread, public authorities, from tiberius ’ administration to the financial policy committee ( fpc ) of the modern bank of england today, have had to adapt both to deal with financial crises when they occur and to try to prevent them occurring in the first place. it has often been an unequal struggle. i want today to review a little of that history from the bank of england ’ s perspective. i will draw out the development of what – following the great financial crisis of 2008 – 9 – has become known as “ macroprudential ” policy. put simply, this is the regulation and supervision of

should record how each individual member of the committee voted on the interest rate decision. as before, it is vital for public confidence in these new arrangements that their intention is not subverted by the evolution of informal conventions - that the integrity of the procedures is respected. in this context we take great pains to ensure that the true nature of the policy debate is reflected in the minutes and that the range of views around our inflation forecast is properly reflected in the inflation report. in fact i think we probably tend to err on the side of drawing too much, rather than too little, attention to differences of opinion within the committee which are often largely a question of nuance. but it is better in my view to err on that side rather than to attempt to submerge the differences. we do not, however, attribute particular views to particular individuals. to do so would invite prepared statements and militate against the inter - active debate which is an outstanding and immensely valuable characteristic of our meetings. it would suppress the kind of “ what if ” discussion in which the same individual may explore alternative views. no attempt is made to concert the outcome of the policy decision ; in fact i go out of my way to discourage any kind of collusion, whether between the internal or external members of the committee - we are, and must remain, nine independent members, individually accountable for our decisions as to how we vote. this, of course, means that the committee is divided as often as not ; but although this initially led to public comment to the effect that the committee did not know what it was doing and could not make up its mind, it is now generally accepted as the natural order of things and helps to underline to the public at large that monetary policy making cannot be a precise science - however much it needs to be informed by all the science available to us. that, in our context, is i think now much easier to understand than a more consensual approach would be, but there was certainly a learning period. it has been suggested to me that the arrangements i have described somehow diminish the position of the governor. well if that ’ s true this governor at least welcomes it! i am sure that all of you are well aware of how finely balanced monetary policy decisions are at the margin, and that all of you have agonised, just as i have, over the right thing to do and the right time to do it. i find the cross - bearings on those