, financial services are something the uk is very good at. the uk is one of the best places in the world to come if you ’ re looking for highly skilled people, deep and specialised financial markets, a robust legal system, and trusted institutions. it is also home to an incredibly innovative financial sector. those are the foundations upon which the uk ’ s comparative advantage in financial services is built. as a very large global financial centre, the uk benefits from so - called ‘ agglomeration effects ’. these are self - reinforcing effects which emerge when businesses cluster together in the same place. in the uk ’ s case, the advantages that attract firms to come to do business here – deep and varied markets and a huge supply of talented financial professionals – get stronger the more firms come. this is because such clustering leads to economies of scale and scope and positive spillovers which further entrench the uk ’ s advantages. the agglomeration effects the uk enjoys as a financial centre are well established and underpin its international competitiveness. although these advantages are not rooted in financial regulation, regulators have an important role to play in providing an environment that protects and enhances these advantages. we know, for example, that firms value predictable and consistent regulation. [ 13 ] so the first thing the pra can do to facilitate competitiveness is to help maintain trust in the uk as a good place to do business. and it can do so by maintaining a regulatory regime that is open to international business, nondiscriminating, predictable, transparent, responsive to threats and opportunities, and which provides clear and accessible rules. one thing i want to make clear is that i don ’ t believe regulators should engage in risky compromises such as regulatory races to the bottom to win business. these compromises plant the seeds of future instability, as anyone who has studied the causes of financial crises will attest. there is no need for the uk make those compromises in pursuit of the underlying advantages and agglomeration effects i described earlier. this approach may possibly be suited to centres that are seeking to start from scratch or from modest beginnings, and do not have much to lose if these risky bets backfire. it is not suited to global financial centres that already enjoy and want to enhance their existing strengths. rather, regulators can contribute to the success of uk financial services by maintaining a record of strong and predictable rules, openness to international business and alignment with international standards that they have

practice, doing so has meant using tools to keep financial conditions sufficiently accommodative to offset as best we can such a large shock. this has been essential to support the flow of credit to businesses, which has been very substantial, and has called on both the monetary policy and financial stability tools of the bank of england. this has also helped to lessen any longer term economic damage from the pandemic, resulting from longer term unemployment and business failures. fiscal policy, too, has played a very big part, helping to spread the cost of this large shock over time, because otherwise the cost to the public and the country would be unbearable. when i step back from all of this, i think the strong logic is that we are using the tools of counter - cyclical policy, consistent with the remit in the bank ’ s case, to support the economy as best as possible through this unprecedented shock. but i sometimes hear that the bank has flouted the rules and thereby damaged its independence, by purchasing government debt and lowering the government ’ s cost of borrowing. in many ways, i am glad that central bank independence is being vigilantly scrutinised. this is an important aspect of the bank ’ s public accountability. but i ’ m sorry to have to be blunt, i ’ m afraid these arguments are entirely without merit. in a world where the government has to manage the task of spreading the cost of the pandemic which would otherwise fall on individuals at great cost to them, and the central bank is acting counter - cyclically to support demand in the economy consistent with its inflation target, it is hardly surprising, and indeed consistent, that the government should be able to benefit from those financing conditions. if the situation was otherwise, and the central bank acted to prevent counter - cyclical policy taking effect, we would be abandoning the remit on which our operational independence is based. put another way, to be independent does not mean to be disorganised. independent pursuit of an inflation target does not mean that monetary policy is uncorrelated with other macro policies, including fiscal policy. indeed in the current circumstances there are mutually reinforcing effects from monetary and fiscal expansions. the consistency of the response of monetary and fiscal policy is something that the imf has emphasised and recognised in its assessment of uk policy. but that does not mean independence has been abandoned. the interventions we have made are effective because the bank is independent, and because