happening to house prices. the answer to the first question - what accounts for the divergence? - remains largely a mystery. the bank ’ s preferred explanation, reached i have to admit via a process of elimination of other plausible explanations rather than by the existence of incontrovertible evidence, is that the divergence reflects the way in which house prices are “ mix adjusted ” to take account of the different characteristics of the houses bought and sold in any one month. changes in the relative composition of the loan portfolios of the halifax and the nationwide over the last year or so are likely to have magnified this effect. to answer the second question - what is really happening to house prices? - the bank has developed an alternative measure of house price inflation using data from the land registry. these data have the advantage that they cover nearly all housing transactions in england and wales and so are more comprehensive than the data used by either the halifax or the nationwide. however, the bank estimate is far from ideal. the published land registry data are not ‘ mix adjusted ’. and, although the bank staff do apply a simple mix adjustment to take account of the basic type of property brought and sold and the county in which the property is located, it is less sophisticated than that used by either the halifax or nationwide. so i would not want to claim in any way that we at the bank have found the true measure of house price inflation. rather, the bank estimate was developed in the spirit of trying to give some guidance to the members of the mpc on the relative weights that they should attach to the conflicting pictures painted by the halifax and nationwide indices. the house price index constructed by the department of environment, transport and the regions is also helpful in this respect. that index has the advantage that it is constructed using a more complete method for adjusting for the mix of houses transacted than the bank estimate, but it is based on only a small sample - approximately 5 % - of mortgage - backed transactions. the bank estimate suggests that house prices increased by 9. 0 % in the year to 1997 q4, compared with 6. 9 % measured by halifax and 12. 9 % by nationwide. the bank estimate is broadly consistent with the detr index, which shows a 7. 9 % increase over the same period. but further work is required on this issue which is of importance to us all. “ divided we stand, united we fall ” that brings me to the monetary policy committee and the prospect for

decision - making, boards ’ collective skillset and the degree of formal independence within the board. governance is an area where supervisors pay a lot of attention, because we are aware of the importance of a robust governance structure and functioning. an example of this is that 7, 371 findings have been raised in this area since the ssm was created, of which 1, 303 remain open. this is because there is always room for improvement and governance should not be seen as a static element. on the contrary, as new challenges arise ( climate risks, esg, digitalisation, etc. ), governance needs to be updated to properly address them. how can we keep encouraging our institutions to improve their governance framework? i believe that we need to continue our supervisory activities, placing greater emphasis on a structured escalation of our supervisory interventions ( escalation ladder ), and insist that a strong board of directors is key to the smooth functioning of banks. we should therefore continue to strengthen governance regulations to make them clearer, in particular as regards fit and proper processes and diversity, to build strong boards for sound decisionmaking. non - executive directors in this decision - making process, non - executive directors ( neds ) play a crucial role. they should oversee management and focus on the key issues that are of concern to all stakeholders. these of course include the usual financial activities, but also emerging risks that could severely impact banks that are not properly prepared for them. in today ’ s complex business environment, new technologies and digital transformation are a key focus for all institutions, specifically for neds. we are in a situation of continuous and very fast change on the digital front, so it is crucial for organisations to be prepared and simultaneously adapt to new applications. i would like to highlight two key elements in this regard : first of all, the importance of defining the digitalisation strategy for the institution. digitalisation is a broad concept that covers different aspects, and it needs to be clearly defined and specified for each institution. and second, the importance of establishing a robust operational resilience framework. the current pace of digital transformation at financial institutions is unprecedented. but increased digitalisation also entails greater ict and cyber risks. not only are malicious attacks against financial institutions and their customers on the rise, but the enormous complexity of these institutions ’ ict systems makes operational errors more likely. in addition, institutions ’ increasing reliance on specialised third parties, very often involving a multi - tiered supply chain, makes operational risk management