are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice application pipeline. a further 10 firms have commenced exploratory engagement with our specialists with a view to a future application. but it is self - evident that, each time we make a requirement more proportionate for firms below a certain size threshold, we introduce one extra adjustment that firms need to make as they grow in size and exceed it. this brings the risk that on the mountain - path from newly authorised firm to ring - fenced bank, we create sheer rock - faces that can be a rather daunting barrier, and require investment in specialist climbing equipment if they are to be scaled. and more broadly, we recognise that there is always the risk that the costs to comply with a regime that is designed for all firms including the most complex can be disproportionate for those that are smaller and simpler. this means we need to do two things. first, we need to do what we can to smooth out those barriers to growth, in order to create a smoother path and not insurmountable rock faces along the way. for example, we have set out a new policy for a ‘ graduated rate ’ approach to setting capital requirements for credit unions with more than £10 million in total assets. 7 and second, we need to help firms get over those barriers. even if we cannot reduce the gradient of the rock faces significantly, we can make sure firms understand the nature of the path ahead so they can adequately plan and be well prepared as the demands become more complex and as investment in more specialised equipment is required. many of the new banks authorised since 2014 seem to have underestimated the development required to become a successful, established bank. it is however in all our interests to work together to mitigate the risks that such growth might entail. a common theme with new firms that encounter problems is that they have not anticipated, and put in place steps to mitigate, the risks they face. inadequate underwriting skills can translate into loan losses further down the line, just as poor anti - money laundering procedures can result in problems with financial crime and costly remediation programmes. it may be tempting to start up the mountain at a sprint. but those that take their time, ensure their crampons are firmly in place and plot their path for each stage of the climb are much less likely to come unstuck later. stumbling on

how we have supervised firms in practice over the past few years, we have brought it all together for the first time so that the mountain path ahead is clear to you all. i won ’ t set out the entire supervisory regime now. but i did want to draw your attention to three changes introduced by the cp, all relating to capital, and which are designed to deliver a clear path from being a new bank at base camp to being established and on the way to the summit. first, we are proposing to update how we calculate the capital buffer requirement for new banks. to date this has been based on an unspecified wind down cost calculation. but interpretation by banks has ( understandably ) been inconsistent, so we are proposing to move to a clear and consistent policy of setting the buffer as six months of operating expenses. this should be enough to allow banks time to find alternative sources of capital or to change their business model if investor support is lost. but we still expect new banks to maintain capital resources to support their business for 12 months ahead ( whilst remaining above the operating expenses buffer ), the reason for which brings me to the second change ; scanning the horizon, 24 / 05 / 19 – https : / / www. bankofengland. co. uk / speech / 2019 / sam - woods - building - society - association - annualconference - london all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice whilst we recognise that obtaining regular new capital is often necessary for new and growing businesses, we are calling an end to ‘ just in time ’ capital planning. instead, we expect any new equity to be injected well before a firm hits its buffers and for there to be a path to the point at which the bank will be self - sufficient in capital generation. if we observe evidence of ineffective capital planning, we will increase our supervisory intensity and consider whether further action is required. it is unsustainable for a firm to remain near base camp making losses forever. and persistent problems mean we may need to shift our focus to considering other routes down the mountain ( as i will explain later ) ; and finally growing banks are expected to develop their stress - testing capabilities so that they are ready to transition to full stress - test based buffer requirements once they reach maturity ( typically but not necessarily five years after authorisation without restrictions ). this has the potential to result in a sizeable step - up in capital