between harmonisation and flexibility, and which accommodate necessary national responsibilities, including for supervision ”. narrow rules - based approaches to regulation create inflexibility and can be easy to arbitrage. the sensible application of judgement involves looking at a situation from several angles, and employing forward - looking tools such as stress tests. for us, “ judgement ” is most certainly not a slogan. so judgement by whom, how, and to what end are reasonable questions to ask. i am going to place most emphasis today on the “ by whom ” question, but use that to illustrate the others. i want to consider the role of boards, but in the broader setting of three groups of people : executive senior management of firms ; boards ( with non - executives in the majority ) ; and supervisors. it is the job of senior executives to exercise judgement on risks and returns on a day - to - day basis. i know that you could be confused to hear me say this given some of the things that are written about financial regulation, but we want firms to earn sustained and thus sustainable returns through the exercise of good business judgement. senior executives exercise that judgement within frameworks set by, and overseen by, their boards, namely the overall strategy, the risk appetite and assessment frameworks and the oversight of controls and compliance. as supervisors we apply our judgement against our framework of rules and regulations, the distinctive feature of which is that they represent public policy objectives and thus the public good, which is the overall objective of the bank of england. bis central bankers ’ speeches i want now to focus on the role of boards. they must be able to set a strategy and risk appetite and oversee implementation, but they do not substitute for the role of the executive. likewise, supervisors challenge hard and can ask for changes, but they do not substitute for the board or the executive. the recent past has not been an easy story in this area. it is very understandable that in the wake of the financial crisis, there was hard questioning of the role of senior executives and of boards. change in the approach of supervision to approving senior managers was needed. it is perhaps natural given the scale of the shock, that some change went too far or not in the best direction. i think there was a rebound in the direction of wanting all non - executive board members to have technical skills of a similar sort, and thus deeper technical knowledge of the business. but that is the job of an executive. when i came back into supervision

triggered liquidity stress in related derivatives markets. an increase in initial margin requirements has greatly increased firms ’ liquidity needs, making it more difficult for some firms to hedge. this recent episode raises the question of whether margining practices, including those between the clearing member and their clients, may be too procyclical. financial markets remain vulnerable to further corrections that could potentially be triggered by an escalation of the war, or a faster - than - expected pace of monetary policy normalisation. conclusion let me conclude. sound financial regulation and greater resilience have helped the european financial system navigate both the pandemic and the economic fallout stemming from the russia - ukraine war. yet sizeable challenges remain. to address financial stability risks, we need to implement targeted macroprudential policy instruments. at the same time, amid global inflationary pressures and risks to growth, we are walking on a narrow path as we strive to deliver on our price stability mandate. but rest assured, we remain fully committed to stabilising inflation at our 2 % target over the medium - term.