john gieve : pricing for perfection speech by sir john gieve, deputy governor of the bank of england, at the bank of england, london, 14 december 2006. * * * many of you will have seen the new financial stability report ( fsr ) that we published in july. our aim in that report was to set out more concisely and clearly than in previous years what we considered the main risks to the stability of the uk ’ s financial system. the bottom line was that the financial system looked pretty resilient to disturbances in the near - term, but there were some underlying, longer term, vulnerabilities lurking in the background. some related to potential mismatches or mis - pricing in international financial markets. others to extended balance sheet positions at home and abroad. and some reflected structural dependencies across the financial system, for example, on the smooth functioning of financial infrastructure. our view was that they were unlikely to cause problems in the near future but there was a non - negligible risk that they could crystallise rapidly and disruptively for the financial system. on past form we would be publishing the next report this month but we have decided to change the publication schedule. future fsrs will appear in the spring and autumn rather than summer and winter. so the 2007 editions are planned for late april and late october. but in case four months is too long to wait, i want to use my comments today to set out our assessment of prospects for financial stability as we near the end of 2006. recent developments our view remains that near - term risks to uk financial stability are low. that is mainly a reflection of the continuation of broadly benign macroeconomic conditions in the uk and globally a rebalancing in global sources of growth does appear to be under way - and we are watching developments in the us economy and movements in the us dollar closely – but overall the global economy remains strong. uk financial institutions profitability and capital levels have remained robust, providing them with a buffer against future disturbances. financial markets have also demonstrated resilience over the past six months. markets were turbulent at the time we were preparing the july fsr. it was unclear whether we were at the start of a significant correction. the subsequent rebound in asset prices, and declines in measures of volatility, showed that it was a pause not a sustained change in risk appetite. more recently, we have seen huge losses at the amaranth hedge fund. these losses exceeded those

“ insurance supervision : 2023 priorities ” ’, january 2023. the pra also plans to remove capital requirements for branches of international insurers operating in the uk as part of the upcoming solvency uk package. see'fundamental spreads − speech by sam woods ', 20 february 2023. 7. the pra currently has 79 supervisory cooperation and information sharing memorandums of understanding ( mous ) in place with authorities across 51 jurisdictions. since the uk left the eu, the pra has signed 34 mous with eu institutions and member states. the pra is in the process of seeking to agree eight further mous with non - eu countries. 8. new agreements include those with new zealand and australia. the bank and the pra will continue this year to support the government ’ s negotiations on at least seven more, including by completing an assessment of the swiss regulatory regime for a mutual recognition agreement which is currently under negotiation. 9. pra consultation paper 15 / 22 and fca consultation paper 22 / 28 – ‘ remuneration : ratio between fixed and variable components of total remuneration ( “ bonus cap ” ) ’, december 2022. 10. the latest version of the regulatory grid is produced by the regulatory initiatives forum which is made up of the bank ( including the pra ), the fca, the payment systems regulator, the competition and markets authority, the financial reporting council, the pensions regulator, and the information commissioner ’ s office. hm treasury attends as an observer member. in addition to producing the regulatory grid, the forum monitors the overall weight of regulation. this pra uses this information to review and, when necessary, adjust its plans for regulatory activity. 11. see also the existing policy index that improves access to current materials. 12. pra discussion paper 5 / 22 – ‘ artificial intelligence and machine learning ’, october 2022. an updated approach to firms ’ broader risk management will incorporate our latest thinking on these topics. 13. the bcbs published a standard on the prudential treatment of cryptoasset exposures in december 2022 : ‘ prudential treatment of cryptoasset exposures ’. the pra will be consulting on an implementation of this standard after basel 3. 1 rules have been finalised. furthermore, the fsm bill would extend current bank and fca regulatory regimes for payment systems and e - money to cover the use of ‘ stablecoins ’ for payments. the bank will have responsibility for