and soundness of regulated firms and to contribute to the securing of an appropriate degree of protection for policyholders. but importantly, the mandates for the fpc and pra ensure that other factors such as long - term productivity and economic growth are taken into account when setting policy. the fpc must pursue its financial stability objective without causing serious harm to the wider economy in the medium or i would like to thank matthew willison, hugh burns, nicolo fraccaroli and david swallow for their assistance in preparing these remarks long term. in other words, the fpc must avoid the ‘ stability of the graveyard ’. 6 and, the fpc also has a secondary objective, subject to its pursuit of its primary objective : that of supporting the economic policy of the government. the pra also has an important secondary objective to facilitate effective competition, and must have regard to a set of regulatory principles, including the desirability of sustainable economic growth. furthermore, the chancellor writes regular letters to both the fpc and the prudential regulation committee, setting out the government ’ s economic policy and making recommendations on how they should discharge their functions. importantly, the pra takes into account the fpc ’ s views on financial stability when setting microprudential policy. to give an example of how this works in practice – in 2015 the fpc set out the optimal overall level of uk capital requirements, balancing financial stability against economic growth. the prc then took into account this judgement when setting individual bank capital requirements. and at the end of last year, the financial policy committee ( fpc ) raised the structural level of the uk countercyclical capital buffer ( ccyb ) rate - that is the rate it expects to set in a standard risk environment - from in the region of 1 % to in the region of 2 %. then, last month, the pra consulted on proposals to reduce variable microprudential minimum requirements ( so - called variable pillar 2a capital requirements ) to take account of the additional resilience associated with higher macroprudential buffers in a standard risk environment. 7 in addition to setting out a clear mandate in primary legislation, there are also a number of accountability mechanisms in place for parliament to scrutinise the work of the fpc and pra against that mandate. for example, pra senior representatives are expected to appear before the treasury select committee ( and other parliamentary committees ), when requested. and the pra annual report is laid before

capital requirements regulation and capital requirements directive. this means that many of the technical details that make up prudential regulation are included in legislation. this would include, for instance, the mathematical formulae used to calculate risk weights. i would like to thank matthew willison, hugh burns, nicolo fraccaroli and david swallow for their assistance in preparing these remarks this model provides legitimacy because the legislation in which the prudential regulation is set out has been passed by a parliament. it is also time consistent, because a deviation from regulatory standards would require a change to legislation. but it is unlikely to be very dynamic because the only way prudential regulation could be adjusted in response to an unintended consequence or new risk that has arisen is a change to the primary legislation, which takes time to happen. it typically takes nine months to issue a new pra rule – with that time including policy development, cost benefit analysis, process for public consultation, and approval by the prudential regulation committee. in contrast, the process for making changes to primary legislation in the uk – which includes debates in committees and both houses of parliament – requires finding parliamentary time for legislation, and then after parliamentary time has been secured, takes longer than a year to complete. finding parliamentary time is not an easy task, especially if the purpose of legislation is carrying out technical amendments to financial services rules. public officials need to compete for attention with all the other important public - policy issues that parliament and government must deal with and if they do not find a parliamentary slot or parliament is dissolved for elections, the legislation gets delayed for the next queen ’ s speech. for example, over the past six months, such events have delayed the passage of a bill that is necessary to implement the final elements of basel 3 ( so - called basel 3. 1 ). by contrast, the financial regulator ’ s task is solely focussed on delivering and maintaining rules that are fit for purpose for their regulated sector only – there is no competition for other initiatives and the process and timetable provides certainty to industry. in a second model, prudential regulatory - setting powers could lie with government ministers. this model would be dynamic because the government would be able to adjust prudential regulation. it would be legitimate since the government is directly accountable to the parliament and ultimately the electorate. but it may not be time consistent because it creates the possibility that prudential regulation will be influenced unduly by the electoral cycle, as was deemed to