of the cma ’ s report. the pra has been given by parliament a so - called secondary objective which i think is best described as requiring us to act in respect of the competitive implications of our own actions and inactions but only to the extent that we are not undermining our primary objective for banks of safety and soundness. we have been working to embed the secondary objective in the pra, and to date our most publicised actions have been in the area of new bank authorisations. the pra has authorised ten banks in the last two years, and currently we have a substantial pipeline of interested parties. we are thinking about competition in our domestic work, but also about how we approach international policy issues. for instance, this week our response to the european commission ’ s consultation on the impact of the new capital regime has been published. it is quite often said that aspects of the capital regime discriminate against smaller banks and building societies that use the so - called standardised capital approach versus larger banks that use their own models. the consequence of this is that smaller banks and building societies cannot compete effectively in lower risk asset markets such as prime mortgages because the capital requirements are too far apart and in favour of large banks. this forces them into riskier assets and undermines their position. this is an area where the leverage ratio acts to counterbalance the difference, a point that is not well enough understood. but in our response to the european commission we said that while the financial stability benefits from regulation of large, internationally - active banks mean these firms should meet global standards, a differentiated approach for smaller firms would recognise the high costs and smaller benefits of applying global standards to them, and should enable us to find ways to create a regime which is more simple and which reduces their reporting burden. this would help to foster competition and would be good for the european single market. this is an important issue, and one that matters if we are to have growing challenger banks. we want to put such a regime into effect, and thus demonstrate that at the pra we are very serious about our competition objective. i hope the european authorities will likewise pursue this important change. we will also be arguing in basel and in the eu to narrow the gap between standardised and internally modelled capital requirements for prime mortgages including by having more risk sensitivity in the standardised approach. and, we have also tightened the standard for models. i also want to be clear that we welcome internal model

i mentioned earlier. but, crucially, it would be for the senior manager to satisfy the regulator on the question of reasonableness – thus the presumption is created until it is rebutted. the change that the government has announced to create “ the duty of responsibility ” will, if parliament approves it, replace the presumption with a statutory duty on senior managers to take reasonable steps to prevent breaches of regulatory requirements by their firms from occurring. thus it will be for the regulator to show that the senior manager did not take such steps as it was reasonable for a person in that position to take to prevent the breach of regulatory requirements. in my view this does not represent a watering down of the requirement. why? well the “ duty of responsibility ” creates a positive duty on senior managers to take reasonable steps to prevent regulatory breaches occurring. this will be on a statutory footing, which hardwires the concept in the very fabric of the regulatory regime, rightly reflecting the importance which society places on this issue. let me be very clear, substituting “ duty ” for “ presumption ” changes the mechanism of enforcement not the substance of the requirement on senior managers, and i would not support changing the latter. there has been a lot of noise around the new regime in recent months, and i have asked people involved whether their problem was with the “ presumption ”, or with the regime more broadly. the universal answer has been that the difficulty was with the “ presumption ” not the regime which appears to have broad support. so, if parliament is in agreement, and i do not presume to take that for granted, i expect that the new regime will be put into effect in the spirit with which it is intended, and that the focus bis central bankers ’ speeches will shift to that spirit and away from finding ways to circumvent the “ presumption ”. to be blunt, i hope that those within firms and their advisors will respect the will of parliament on this crucial point. the new regime matters hugely for getting the right incentives for people running firms. the important word is not “ presumption ” or “ duty but rather “ responsibility ”, it ’ s about holding people more personally to account. if there are people who wish to argue that they should not take on the responsibilities of the job they do, then i believe they have no place in the industry, it ’ s that simple. we all want well - run firms