of money in order to support a recovery in the economy and keep inflation on track to meet our target. and because monetary policy is a flexible instrument that can be changed in either direction each month, it is the best tool for managing the economy in the short run. nevertheless, the road ahead is unlikely to be straight. there is considerable uncertainty about the prospects for both the united states and the euro area – our most important export markets. business and consumer confidence at home has weakened recently, and it will be some time before our banking sector is able to finance a recovery on the usual terms. the transition to a better balanced economy will be difficult. but we are already seeing encouraging signs of expansion in manufacturing and uk exports. this morning ’ s figures show a small rise in the claimant count and a small fall in the labour force survey measures of unemployment. but the big picture is that unemployment is higher than before the crisis but lower than many had feared a year ago. in july, on one of my regular visits to different parts of the country, i met with the scottish tuc in glasgow to learn more about the labour market there. our contacts with experienced union officials in touch with a range of companies and sectors are the best source of intelligence on labour markets. with your help, we are determined to understand what is happening in every region and country of our economy so that we can set the right monetary policy. i want to assure you that the bank of england is there to serve the whole economy, right across the length and breadth of this country. the costs of this crisis will be with us for a generation. and we owe it to the next generation to seize this opportunity to put in place the reforms that will make another crisis much less likely and much less damaging. we at the bank of england and you in the trade union movement should work together. that is why i am pleased to be with you today. it will require patience and determination on all our parts, including your members. but the prize of restoring and maintaining economic stability – and a return to sustained rises in employment and living standards – will be worth the effort.

. the framework for regulatory approval processes and the fitness and propriety test, relevant offences, and introducing the concept of conduct rules and statements of responsibilities ) are set out in legislation. but regulators were given considerable discretion in filling in the detail of the framework – including what functions required approval, the content of the conduct rules, and the detailed systems and controls requirements that apply to firms. ring - fencing. the act amended the pra ’ s objectives to incorporate ring - fencing, and set out the basic structural aspects of the regime ( in particular about the scope of the ring - fence ), while leaving much of the framework to be established via statutory instruments from the treasury. the statute also detailed matters related to ring - fenced banks ’ governance and policies which the pra should make rules about. the pra also implemented further details of the regime ( e. g. systems and controls requirements, capital requirements for ring - fenced banks, independence requirements, access to payment systems ) via rules. to be clear, i am not focused here on the question of whether or not the smcr or ring - fencing are a good thing, about which people will argue for decades. rather, i am focused on the legislative style which parliament adopted in order to introduce them – how this style compares to other models, and which model seems to fit best the principles set out above for a future financial services framework in the uk. see annex 1 the 2000 financial services and markets act ( fsma ) established the current domestic uk framework for financial regulation all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx to my mind, if we look across the four main legislative styles adopted by parliament in the last couple of decades – those for delivering fsma, smcr, ring - fencing and the eu model – the one that fits the principles best is the approach used for smcr : 1. robust prudential standards. it ’ s a tough regime which enables us to hold the top brass to account when things go wrong. 2. responsible openness based on international collaboration and standards. the approach taken works with the grain of the international financial system, and other countries have already borrowed heavily from it. 3. proportionality and sensitivity to business models, and promoting competition. the regime has left us room to tailor it so that it fits a small insurance company as well as it fits a huge bank. 4. dynamism and responsive