the years leading up to the start of the crisis there was a dearth of prudential supervision, but i am quite prepared to acknowledge that there have been periods where the opposite has been true. my point here is that i don ’ t think the system of integrated regulation demonstrated the ability to deliver a stable equilibrium of conduct and prudential supervision. third, there is something of an inbuilt tendency within integrated regulation to play down the active debate of issues where conduct and prudential regulators find themselves with potentially conflicting objectives. of course, it can be said that the “ twin peaks ” approach that we are introducing could lead to endless debate and no outcomes. my own view is that that is not correct, and that the benefits of clarity in defining the objectives of the pra and the new conduct authority, the fca, will dominate any other consequences. there are several important reasons why reform of financial regulation will, in my view, be an important step forward, starting with establishing very clear public policy objectives for financial regulation to which we, as the regulators, are fully committed. for both banks and insurance companies, the pra will have the objective of promoting the safety and soundness of firms. consistent with this objective, it will focus on the potential harm that firms can cause to the stability of the financial system in the uk. we define a stable financial system as one that is resilient in providing the critical financial services that the economy needs. and this supply of services is a necessary condition for a healthy and bis central bankers ’ speeches successful economy, as demonstrated by the costs imposed by the financial crisis on the public and society at large. for insurance companies, the pra will have the second objective of contributing to securing an appropriate degree of protection for those policyholders. why do we need a second objective for insurance? for me, it rightly emphasises that in taking out some forms of insurance policies, the public can become locked into very long - term contracts, much longer often than is the case in banking with deposit contracts. bearing this in mind, the public interest i think justifies a second objective for insurance, which is more directly targeted at the situation of individual policyholders. in contrast as bank deposits are redeemable on demand at par value, and as banks lend the deposits at longer maturities, so they are inherently fragile and vulnerable to contagion, so protecting the system protects depositors. there are a number of important points in this description

when the call came ; or if investment institutions were unwilling to enter into such commitments on a sufficient scale for the insurance to make a difference to the system ’ s resilience. another idea circulating currently 30 is that banks would be required by the authorities to issue hybrid - debt - capital instruments that could be converted when needed into loss - absorbing equity. in one variant, the option to require conversion would lie in the hands of regulators provided a systemic - severity test were passed. summary and conclusions during the current crisis, the normal functioning of the financial system broke down, with profound effects on credit conditions and on the appropriate monetary policy response. although i have ranged widely today, i have in fact deliberately not covered the operations employed in some countries to lend directly to firms, effectively by - passing the financial system ; or the actions by some central banks, including the bank of england, to expand the money supply in an environment of near - zero policy rates. instead, i have focused on the repertoire of instruments directed to supporting, and ideally reviving, the financial system itself : funding liquidity, market liquidity, and solvency. in terms of funding liquidity, following innovations over the past year the bank of england now offers six permanent facilities through which liquidity can pass between us and the banking system – intra - day repos to oil the wholesale payments system ; variations in banks ’ reserves balances, which comprise a prime liquid asset for banks ; open market operation ( omos ) against government securities ; use of overnight operational standing facilities to absorb day - to - day frictional payments shocks ; longer - term repos through which the bank for example, “ an expedited resolution mechanism for distressed financial firms : regulatory hybrid securities ”, squam lake working group on financial regulation, april 2009, council on foreign relations. lends cash against wider collateral ; and a discount window facility, through which banks without fundamental problems of solvency or viability can exchange a very wide range of collateral for uk government bonds. in designing those facilities the bank has been clear about its goals. on the financial stability front, we frame them as follows : “ to reduce the cost of disruptions to the liquidity and payments services supplied by commercial banks. the bank does this by balancing the provision of liquidity insurance against the costs of creating incentives for banks to take greater risks, and subject to the need to avoid taking risk onto its balance sheet. ” in that area, central banks are able to draw on