, and the new operating frameworks put in place over the past 5 years will allow that to happen more quickly and easily. how will this all co - ordinate in practice? when the bank, hmt and fsa took joint action in 2012 to reignite the recovery via the funding for lending scheme – reviewed in my two previous talks to you – the fsa, as predecessor to the pra and having two members on the interim fpc, contributed by relaxing liquidity requirements and making it clear that liquidity buffers were there to be used. this was a crucial element of the package. coherence vs agreement i believe i have set out so far a reasoned view that the three bank policy committees – the mpc, fpc and pra have a coherent set of objectives, structures, appropriate policy tools and coordination to ensure that there is not any inherent absolute conflict in the framework. and the strategic changes internally at the bank announced earlier this year could be seen as being a reinforcement to that structure by maximising the synergies across the bank, including the pra. but coherence doesn ’ t always mean agreement. there will no doubt be disagreements at some point. indeed, the appointment of independent members to the policy committees is intended to ensure challenge and the absence of “ group - think ”. dissenting views on the mpc are not only an established part of the culture but actively encouraged by the treasury committee in parliament. the fpc and pra board, in contrast, generally work by consensus, although there are provisions for recording dissent and votes if necessary. but disagreements over judgements between individuals are normal – that ’ s why we have decision making by committee in the first place. what we have not seen is any reason why the structure should be regarded as internally conflicted. how likely is it that there will be dissent across committees? there are mitigants in place to reduce the chances of that. cross - chairmanship and membership from bank executives should enable us to keep to coherent policies even when there are derivatives, prime brokerage, secondary market trading activities are all examples of what i mean here. bis central bankers ’ speeches differences of opinion. and i say that – despite evidence from operation of the mpc where there has generally been as much dissent recorded between the bank executive members as by the independent members – because we have a collective institutional need to make the whole framework function in the best interests of the uk economy. and another structural way of

paul fisher : microprudential, macroprudential and monetary policy – conflict, compromise or co - ordination? speech by mr paul fisher, executive director for supervisory risk specialists & regulatory operations and for insurance supervision of the bank of england, at richmond university, london, 1 october 2014. * * * the author is also chair of the ifs school of finance. any views aired in this speech are personal and should not be taken as a policy statement by the bank of england. nevertheless, the speaker is grateful to colleagues at the bank for helpful comments, and to andrew hughes hallett for his advice on policy coordination issues over many years, including comments on the content of this speech. thank you for inviting me once again to speak at richmond university. in the last year i have moved within the bank of england from the markets directorate to the prudential regulation authority ( pra ) and from the monetary policy committee ( mpc ) to the pra board. the pra board is one of our three formal policy committees, and makes the highest level supervisory decisions for those firms authorised by the pra. that includes insurance companies, banks, building societies, credit unions and major investment firms. i have been attending meetings since june and will become a voting member in due course. having previously also served on the interim financial policy committee ( fpc ) for 2 years, and the mpc for 5 years, i want to use this lecture today to set out how the three policy committees of the bank work together. i have seen and heard assertions in the press and other commentary that the three committees with their different objectives will inevitably be in conflict. whilst there are many difficult policy challenges for each of the committees, and different judgements can be reached by reasonable people on any policy question, i will argue today that conflict is not inherent in the structure in the sense of having to choose between competing objectives. there should not be any compromise in terms of achieving those objectives over the medium term, even if the actual setting of each policy lever needs to take others into account. the key to realising this outcome is effective co - ordination. much of the economics literature around policy co - ordination traditionally focussed on two problems : the coordination of monetary and fiscal policy, especially in the case of an independent central bank ; and international macroeconomic policy co - ordination 1. in the past decade or so there has been rather more on inter - institutional coordination 2. i will be drawing on that body of established