climbing mountains safely speech given by sarah breeden, executive director, uk deposit takers supervision building on remarks given at the pra annual conference for chairs of the non - systemic uk banks and building societies on 6 july 2020 22 july 2020 i am grateful to nick lock, will saunt, philip sellar and alex stringer for their assistance in drafting these remarks all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice introduction today the prudential regulation authority ( pra ) is launching a consultation1 on a new guide for banks – a guide that is designed to help new and growing banks scale the mountain from initial authorisation to becoming an established player in the banking market. the guide builds on the steps we have already taken to lower barriers to entry for new firms, and which over the past few years have helped support real change in the uk banking system. but there is more to do. and we hope these clear expectations will promote continuing competition in the sector by allowing firms to plan a safe route higher up the mountain. as firms plot their path out of the covid stress, we must do our best to support competition, not risk a return to the ways of the past. the start of our climb in the years following the financial crisis, consolidation rather than competition seemed to be the norm. indeed, in the three years before the creation of the pra in 2013, just two new uk headquartered banks had been authorised. and the financial crisis had exposed the need to ensure uk retail deposits were never again put at risk by poor management including of the international and investment banking activities of the big banking groups. parliament rightly did two things to address these issues. it implemented legislation requiring the ring - fencing of the core services in the largest uk banking groups those on which retail and smaller business depend. 2 and shortly after setting up the pra, it gave us a clear secondary objective to facilitate effective competition. 3 the pra embarked on multiyear programmes on both fronts. to achieve ring - fencing, the banking system saw over £800 billion of assets moved between legal entities, governance structures re - written and it systems rewired. as part of our focus on competition, the new banks start up unit was established with the financial conduct authority in 2016, 4 and barriers to entry for new banks were lowered. since the creation of the pra we ’ ve authorised 22 new start - up banks, and

likely bringing benefits to payment efficiency, raises questions around transparency and how resilience and consumer protection will be ensured. central banks might be involved in this infrastructure too, but where might the role of the central bank start, and stop? privacy and data protection issues are also a key question. digital currencies, depending on their design, could provide considerable information on how people spend their money, and we cannot compromise on the protection of our privacy. private firms might seek to use these data, with appropriate user consent, to offer improved services, but we ’ ve seen widespread mis - use of data in the past. digital payments could entail greater data on users ’ identities and transactions being centrally visible. the data generated could have huge opportunities for the detection and prevention of financial crime, but this must be balanced with the risk of surveillance into private financial matters. these questions, as well as issues of encouraging inclusion and promoting competition, are not ones for central banks and regulators alone to answer. they go the heart of how we use money and who should be responsible for safety and security. there needs to be a wider debate between policy makers, governments and society as a whole. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice conclusion we have reached the point in the cycle of innovation in payments where it is essential that we set the standards and thus the expectations for how innovation will take effect. it should not happen the other way round, with the standard setting playing catch up. the answer is not to strangle innovation, and it does therefore require a strong dialogue between the parties, which i think we have. it also requires the sort of thoughtful input that brookings scholars have made. if i can end with one overarching point, i think the public expects its payments to carry the assurance of value that comes with money. at this point, my mother would have said firmly to me, “ thank you for that statement of the blindingly obvious ”. to which i would say, “ i look at the debate going on and it isn ’ t so obvious any more, but it should be. ” thank you all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice