stability of the graveyard by crushing all life out of the financial system – in other words, that we don ’ t really believe in the mixed economy system. i will leave you to judge whether our regulation, which allows a medium sized bank to run a balance sheet that is thirty three times bigger than its shareholders ’ equity, is consistent with the idea that we are insisting on a risk - free system. this is plainly not a zero - failure regime. i also sometimes find individuals in institutions we supervise and regulate who think we take a wicked glee in constantly rewriting the rules. that is also wrong. revolution is not of itself an objective, so like all self - respecting revolutionaries we are focused on defined goals : a strong and stable banking system with no taxpayers ’ money spent on bailing out a pra - regulated financial institution ; and a resilient insurance sector which does not pass risks back to policyholders when they crystallise. i think those goals are in sight, and the remaining path to them is now largely set. therefore, while i cannot speak for other countries, my assessment is that here in the uk we have reached the end of the revolutionary period in which major reforms to prudential standards were required in response to the 2008 financial crisis. individual capital adequacy standards all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx of course, there is important work to finish off in basel, and constant evolution will be necessary as firms and financial markets themselves evolve. no regime is or ever will be perfect, but i think the one we are settling on is a massive improvement on the old one. long live the revolution! but standards can ’ t just stand there. to bear down on risks to financial stability, they have to be implemented. here there is still a lot of work to do, particularly on the banking side. banks have already made big strides in building up their levels of going concern capital, and we are close to finalising the basel iii global standard. in some other areas, implementation is only very recent. for example, with respect to accountability, we now have a robust but proportionate framework to prevent the ‘ recycling ’ of individuals with poor conduct records across pra - regulated firms. we are also making sure that buy - outs of variable remuneration do not allow bank employees to avoid the proper consequences of their actions. all that helps make sure that what was

mr. plenderleith considers what is new in the financial markets in the united kingdom speech by mr. ian plenderleith, an executive director of the bank of england, at the 6th central banking conference, in london on 18 / 11 / 97. 1. this has been a year marked by important developments in the uk financial markets and i am delighted to have this opportunity to take you through some of the highlights. the uk ’ s new monetary framework 2. perhaps the single most momentous change in the financial landscape in the uk has been the new government ’ s decision, in may, to give operational responsibility for interest rates to the bank of england - - essentially, to establish operational independence for the central bank. this significant reform, which took effect immediately, and is to be the subject of legislation recently introduced in the uk parliament, represented an immediate concrete demonstration of the new government ’ s commitment to monetary stability. it ensures that monetary policy will continue to be directed to the pursuit of low inflation, recognising that that is an essential pre - condition for achieving the sustained growth in output and employment that we all seek to achieve. the step was warmly welcomed by the markets, as was evidenced by the immediate fall of around 50 basis points it precipitated in long bond yields. 3. the framework put in place with that announcement has been carefully constructed and i would like to point to four features of it that i believe will be important to its long - run effectiveness. 4. first, the target the bank of england is to pursue - - a low inflation target of 2½ % - - is set by the government. in an open market economy, the conduct of an effective monetary policy is helped enormously if the authorities can be clear and open about the price stability objective they are pursuing ; and in a democratic system, it is absolutely right that the elected government should set this critical strategic objective for the central bank to pursue. 5. secondly, it is then the responsibility of the bank of england to achieve this low inflation target, principally through management of interest rates. but this responsibility is to be conducted within a structured framework. decisions on interest rates are taken by a monetary policy committee in the bank, consisting of nine members : five of these come from within the bank - - the governor, the two deputy governors and the two executive directors responsible for monetary policy ; the other four are appointed by the chancellor of the exchequer and are recognised experts in their field -