be prepared to make meaningful transition commitments over a 12 to 24 month horizon. bank of england data collection initiative before i hand over to you all to begin the important work of this group, i want to make you aware of a new initiative the bank is embarking on, aimed at enhancing our measures of overnight interest rates in sterling markets. the bank has a special interest in monitoring the overnight money market because it is a key aim of monetary policy to influence conditions in that market. understanding developments in money markets is a crucial part of the bank ’ s assessment of monetary and financial conditions. it is therefore of considerable importance to the bank that robust, transparent measures of overnight interest rates are available. it is also in the interests of sterling markets more broadly that robust benchmarks are available. the two main existing sterling overnight benchmark interest rates, sonia and ronia, are based on the rates paid respectively on unsecured and secured deposits placed via brokers. the volume of transactions underpinning these benchmarks has fallen significantly in recent years, reflecting reduced money market activity as well as a decline in brokers ’ share of that activity. the decline in transactions volumes raises questions about the long - term robustness of these benchmarks. that is of particular concern in respect of sonia, which forms the basis of the sterling overnight indexed swap market, and is referenced in contracts with a gross notional outstanding value in excess of £13tn. see http : / / www. bankofengland. co. uk / markets / pages / sterlingoperations / rfr / rfr. aspx. bis central bankers ’ speeches in our view there is a clear need for a more secure and broad - based source of transactions data to support robust overnight benchmark interest rates in sterling markets. accordingly, we have reached the conclusion that the bank of england should collect each day, from banks and building societies active in sterling money markets, data on their sterling overnight deposit transactions. the purpose of this data collection is to secure and improve the information available to the bank on conditions in money markets, benefiting our analysis of both monetary policy and financial stability. we have written to around 30 banks who we will ask to participate in this data collection exercise. the bank and the financial conduct authority are in discussion with the wholesale market brokers association, the administrator of sonia, regarding the future evolution of that benchmark. we believe that the data we plan to collect should, in time, play an important part in providing

what matters most to you is what actually happens to bank rate, now and in the future. that is because the interest rates on 70 % of loans to households and more than 50 % of loans to businesses are linked to bank rate. 5 and it is the bank of england that controls that rate. we do not intend even to consider raising it before unemployment falls to 7 %. when it does reach that point, we will control whether a rise is warranted, taking into account the strength of the recovery and the outlook for inflation. the upward move in market expectations of where bank rate will head in future could, at the margin, feed into the effective financial conditions facing the real economy. the mpc will be watching those conditions closely. if they tighten, and the recovery seems to be falling short of the strong growth we need, we will consider carefully whether, and how best, to stimulate the recovery further. our forward guidance was clear that, although we would not reduce the stimulus until the recovery is secure, we would if necessary provide more. crossing the threshold to a healthy banking system confidence that interest rates will stay low is a necessary step to securing the recovery, but it is not sufficient. the uk also needs a fit and healthy financial sector. it plays a vital role in generating services output in the uk, creating jobs and in exporting to the rest of the world. to serve the needs of the wider economy by extending credit to where it is needed, banks must command the confidence of their customers and investors. that is why a second element of the bank of england ’ s strategy is to ensure that banks reach a clear threshold of good health. some argue that the repair of banks ’ balance sheets holds back economic recovery because it causes banks to cut back their lending. the reality is the opposite : where capital has been rebuilt and balance sheets repaired, banking systems and economies have prospered. us banks have added more to their capital base since the crisis and, as a result, have been able to provide more credit to their economy than uk banks have to ours. in the past two years, uk banks have reduced their lending to the real economy by 1 %. in those same two years, us banks have increased their lending by more than 8 % ( chart 2 ). within europe, the correlation between the market ’ s assessment of a bank ’ s capital base at the end of 2011 and that bank ’ s lending over the subsequent year is striking ( chart 3 ). without an