mark carney : building real markets for the good of the people speech by mr mark carney, governor of the bank of england and chairman of the financial stability board, at the lord mayor ’ s banquet for bankers and merchants of the city of london at the mansion house, london, 10 june 2015. * * * i am grateful to ben nelson, iain de weymarn, nicola anderson, alex brazier, andrew hauser, chris salmon and tim taylor for their assistance in preparing this speech and accompanying open forum document. my lord mayor, lady mayoress, chancellor, ladies and gentlemen. almost 350 years ago, the great fire destroyed the city of london and rendered 100, 000 people homeless. it took half a century to rebuild. the legacy of the great fire endures, including such wren masterpieces as st paul ’ s and his twenty - five other steeples that survive today within the city ’ s precincts. but the fire ’ s legacy is not limited to how the city looks, it extends to what the city does. the blaze led nicholas barbon to establish the first insurance company, an innovation to fulfil a social need : the sharing of risk. public authorities complemented private initiative. there was a royal proclamation that set standards for wider roads and houses built from brick and stone instead of timber. and parliament passed the parish pump act to prevent “ mischiefs that may happen by fire ” by establishing fire brigades and improving water supply. so that spark in pudding lane ignited much more besides the great fire itself : – the provision of liquidity to limit contagion ; – a recognition that clear, well - understood codes contribute to the greater good ; and – a belief that financial markets can solve real world problems. from the coffee houses that served as meeting places for entrepreneurs and merchants ; to the exchanges that supported the trading of financial claims ; to a central bank that acted as lender of last resort : a rich infrastructure developed to support markets that served the uk and the world. as it grew into the world ’ s leading economic and trading power, the uk also became its centre of financial capitalism. by the early 20th century, though no longer the world ’ s largest economy, the uk was still its hub of international finance. it held close to a half of the world ’ s stock of overseas investments and traded one third of all negotiable instruments. the city has retained its pre - eminence through market innovation. from eurobonds to

a statutory basis for the first time. this was not necessarily a welcome development for the bank. george blunden, head of banking supervision at the time, felt the key characteristics of the bank ’ s approach – flexible, personal, progressive, participative – were highly desirable, and he was keen not to have these eschewed by the forthcoming legislation. the bank prided itself on its flexible approach, its recognition of the role of the market and its consensual mode of supervision – and was determined not to lose this as its oversight of the banking sector inevitably took on a more formal tone. in large part, the bank achieved its aim – the 1979 banking act was more evolutionary than revolutionary and written in such a way that “ clear scope was preserved for the continuance of the bank of england ’ s particular supervisory style ”. indeed, “ the legislation was designed to interfere as little as possible with what was regarded as good in what had come before and only to add to the earlier arrangements new features where the previous system had been found wanting ”. the introduction of the act did, though, formalise some of the basic supervisory activities carried out by the bank as well as introduce some new conditions, not least the requirement for the bank to authorise deposit - takers. in fact, the bank did indeed withdraw licences and wind up deposit - takers on at least two occasions following the act ’ s introduction. in addition, there was an increased focus on the fitness and propriety of individuals running the banks, and an acknowledgement that “ this emphasis on qualitative assessment has been born of experience, as management problems and inadequacies have typically provided the first sign of difficulty ”. moreover, the bank now received and reviewed on a quarterly basis returns which included a more detailed breakdown of assets and liabilities as well as profitability. the act also contained powers for the bank to commission third party expertise to review aspects of a firm ’ s business, a commonly - used tool by the bank in a bid to make http : / / www. bankofengland. co. uk / education / pages / resources / inflationtools / calculator / default. aspx ibid, p. 74 ibid, p. 96 ibid, p. 77 ibid, p. 86 ibid, p. 107 ibid, p. 104 all speeches are available online at www. bankofengland. co. uk / speeches