the revolution is over. long live the revolution! speech given by sam woods, deputy governor, prudential regulation and chief executive officer, prudential regulation authority at the city banquet, mansion house, london 26 october 2016 i am grateful to alex holmes, chris faint, kayleigh guinan, richard newman and the pra executive directors for their assistance in preparing this speech. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx my lord mayor, ladies and gentlemen let me begin by saying that it is a great privilege to be here tonight, and a great honour to lead the prudential regulation authority ( pra ) within the bank of england. tonight i am going to start with a word you don ’ t usually hear from a regulator. my theme is revolution. not a political revolution, but a prudential revolution, a revolution that has occupied your minds – and our speeches – since 2008. before i come onto that, lord mayor, i must point out that you have allowed a renowned and formidable revolutionary into our midst right here in mansion house tonight. what ’ s more, he is the chief executive of the financial conduct authority. now, it is true that andrew bailey doesn ’ t immediately make one think of che guevara. but andrew has been right at the forefront of the revolution in prudential regulation we have had here in the uk over the last 8 years. nobody has done more to rescue, repair and reform the uk financial system. andrew, it has been an absolute pleasure to serve as one of your guerrillas, and i very much look forward to working hand in glove with you in our new roles. for the 1, 580 banks, building societies, credit unions, insurers and major investment firms we supervise, there is a simple message about my approach to the role of running the pra. that approach is : more of the same. that means supervision which is firm but fair, using all of the latest analytical tools and techniques, together with a healthy dose of common sense. my job is to serve the public interest by focusing on the objectives given to us by parliament : promote safety and soundness, protect insurance policyholders, and – secondary to both – facilitate effective competition. these three objectives form a complete and coherent whole and i am absolutely committed to them. but they are easier said than delivered. so i am very proud of the effort my 1,

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