building the right capabilities. some insurers do investment in - house and others outsource. all insurers need people with sufficient market knowledge in all three lines of defence. that includes underwriting, risk management and potentially work out. 3. developing appropriate management information, including for the board. 4. appropriate valuations, internal ratings, and matching adjustment and solvency capital requirement calculations. on this final point, we have provided considerable guidance on our expectations in supervisory statement 3 / 17 ( ss3 / 17 ), particularly in relation to restructured equity release mortgage portfolios. one thing that has become clear to me is the importance of internal ratings. these can drive both asset valuations ( if insurers use the approach of mapping to valuations of similarly - rated traded assets ) and the matching adjustment benefit. we said in ss3 / 17 that : “ an internal credit assessment should consider all possible sources of credit risk, both qualitative ( eg due to strength of the terms and conditions in the loan agreement or a lack of default data ) and quantitative ( eg due to economic stresses ), and how these may interact. an internal credit assessment will then need to be mapped onto a credit quality step ( cqs ). the pra ’ s view is that the cqs to which an internal credit assessment maps should lie within the plausible range of cqss that could have resulted from an issue rating given by an external credit assessment institution ( ecai ). broad consistency between the cqss resulting from firms'internal assessments and ecai issue ratings will help to mitigate the risk of undue bias in the resulting fundamental spreads. ” this does not mean that we want insurers simply to adopt rating agency models across the board. we want firms to develop their own rating models that take into account all possible sources of credit risk. i am mindful here of the financial stability board standard against mechanical reliance on ratings. 7 “ the goal of the fsb principles is to end mechanistic reliance on ratings provided by http : / / www. fsb. org / work - of - the - fsb / policy - development / additional - policy - areas / reducing - reliance - on - credit - ratings / all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx ecais by banks, institutional investors and other market participants by reducing the “ hard wiring

’ s why a phrase such as “ the 2018 stress test shows the uk banking system is are resilient to deep simultaneous recessions in the uk and global economies that are more severe overall than the global financial crisis and that are combined with large falls in asset prices and a separate stress of misconduct costs ” has become … all speeches are available online at www. bankofengland. co. uk / speeches … “ banks can lend to households and businesses in bad times as well as good ”. and it ’ s why those of us who make the decisions are hosting citizens panels around the country. these are groups of 20 - 30 citizens from all walks of life and a diverse range of backgrounds. we ’ re very grateful to those in the north east, northern ireland, yorkshire & the humber, london, scotland, the west midlands, and the south west who, in recent months, have spent an evening with me or my colleagues. they ’ ve given us much to chew on about how the economy and the financial system really look from where they sit in different parts of the country and society. they ’ ve challenged us on the financial crisis, quantitative easing, interest rates, living costs and more. and most importantly, they ’ ve held us to account, forcing us to explain every aspect of our work. and some. while that ’ s not easy, it ’ s essential. because it ’ s their economy, their financial system and their lives that we influence. we are simply citizens in their service. all speeches are available online at www. bankofengland. co. uk / speeches