gateway in several ways : a mechanism to manage communication between networks ; something to ensure that data flows seamlessly but securely ; or simply, an entry point. and indeed, we are all of that. as a central function, we track developments, trends, and changes across the market. and that puts us in a pivotal position to drive change and deliver the best outcomes for firms, policymakers, and the wider industry. our priority is to ensure that the gateway is modern and in step with a changing world. this means that it is strong, transparent, and accessible, so that firms arrive when they are ready, but do not waste valuable energy passing through. pairing proportionate regulation with efficient and transparent implementation in how we handle regulatory transactions will contribute to making the uk a safe, attractive, and competitive market for financial services firms. this leads me on to the two key aspects of our vision for authorisations. firstly, we want interactions with us to be streamlined. we do not want firms expending unnecessary effort when passing through the gateway – engagement should be smooth, easy to navigate, and timely. that requires us to make our expectations clear and to continuously improve our operational efficiency and effectiveness. secondly, we must continue to uphold high standards and the integrity of the regulatory gateway. a streamlined gateway is not the same as an open door without checks. providing an early, proportionate challenge to transactions that pose a threat to the pra ’ s safety and soundness objective is better than waving them through and addressing the consequences later, both for confidence in the uk ’ s regulatory regime and for firms themselves. i am especially pleased to be here today, speaking at thecityuk, as i know this is a topic you and your members have a keen interest in and continue to support. the pra and the industry are closely aligned on this vision and its importance to the uk financial sector, and i want to take this opportunity to explain why this matters to us and how we are pursuing it. the pra ’ s secondary growth and competitiveness objective first, let me touch on our new secondary growth and competitiveness objective. because i think that authorisation is one of those functions that, while not visible to many outside of this room, has made and will continue to make an important contribution to the uk ’ s competitiveness internationally. the pra ’ s new secondary objective requires the pra to act, when it can, to facilitate the uk economy ’ s international competitiveness and its growth

environment had a lot more to do with this narrowing, along with sluggish loan demand. historically low interest rates have significantly reduced the yields banks earn on their assets, especially mortgages. banks built up their holdings of mortgages as market conditions generated such remarkable volumes of these loans, and as weak demand for commercial loans left a void in bank balance sheets and income. historically low rates on new mortgage loans, together with rapid prepayment of higher - rate mortgages, have sharply reduced yields on bank mortgage portfolios. the preliminary data for 2003 indicate that the effective yield on mortgage - backed securities, including adjustable - rate products, fell to 4. 22 percent ; by late in the year, yields had fallen to only about 3. 90 percent. along with this pressure on yields, banks have faced an interesting new pressure on funding costs. for much of the last two years, households have been inclined to keep their assets very liquid and flexible. interest rates have been low by historical terms, and didn't seem to provide much incentive for households to tie up their assets in time deposits. the stock market - at least through the spring of last year - was on a downward track and certainly not providing attractive returns. flexible bank deposits offered a comfortable compromise, providing positive returns, deposit insurance, and flexibility to redeploy funds if alternative investments became more attractive. in this setting, bankers have valued core deposits even more highly, and have paid up for them. in particular, they have favored nonmaturity deposits such as money market or savings accounts. smaller - denomination certificates of deposit, in contrast, have declined steadily over a period of some years. influenced by the low interest rate environment, banks reduced the rates on their nonmaturity deposits by far less than money market rates had fallen. the result has been tighter margins, but with an important potential side benefit. the success that bankers had in raising these nonmaturity deposits created opportunities to reclaim some of the market share that bank deposits had lost over the previous decade or two. money market and savings accounts, in particular, now fund 30 percent of bank assets. remarkably, despite these pressures, it now appears that bank margins recovered to some degree late in 2003. the improvement was only about six basis points, but appears to be significantly influenced by slower prepayments and the resulting increases in mortgage asset yields. there were a host of other forces at work, suggesting that the improvement in margins may or may not be sustainable. still, banks