setting a minimum requirement for own funds and eligible liabilities ( mrel ) ’, december 2020. see bank of england financial stability report, december 2019 and hm treasury / bank of england / pra / financial conduct authority, ‘ regulatory initiatives grid ’, september 2020. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice returning now to the simpler regime and moving on to my second term, ‘ strong ’. here i want to repeat sam ’ s very clear message that we have absolutely no appetite to weaken standards. what that means is that we do not think that we have made any part of the banking system too safe. nor do we think that a simpler regime should lead to any change in the level of resilience of the firms we supervise. what we aim at is a simpler regime which delivers the same level of resilience for small firms in a more efficient way. which brings me to ‘ simple ’. i will have more to say about this term because – ironically – simplicity is not itself a simple idea. i will therefore explain what we mean by ‘ simple ’ and how that gives rise to some important design choices for the simpler regime. we know that banking regulation doesn ’ t always seem simple. research by bank staff has documented a near - doubling in the length of uk banking regulation since the financial crisis of 2007 - 2008 to almost three quarters of a million words. 6 it won ’ t surprise you to hear that i ’ m firmly convinced that new rules were needed to address vulnerabilities which that crisis revealed. but i also recognize that we have a complexity problem when we have more rules than we need. that can happen when we apply all of our rules to all the firms we supervise. some of the rules we need for big, complex firms might not be needed for smaller firms. one problem with complexity is that it brings costs. firms must spend money interpreting rules and operationalising requirements and, as with other sorts of overheads, some of these costs are fixed costs which are the same for all firms regardless of their size. research, including the pra ’ s own analysis of survey responses from uk firms, suggests that the fixed costs of implementing new requirements can be proportionally higher for small firms than for large ones when measured as a fraction of a firm ’ s assets. 7 what this tells us is that there are economies of scale when it comes to compliance costs and

6 july 2020. supervisory statement 3 / 21 - non - systemic uk banks : the prudential regulation authority ’ s approach to new and growing banks following consultation paper 9 / 20 – non - systemic uk banks : the prudential regulation authority ’ s approach to new and growing banks. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice are likely to grow out of the simpler regime. and the discussion paper asks for comments on how that kind of optionality could be introduced. but that might not always be possible or appropriate for all firms, so we will need to design the simpler regime in a way which minimises barriers to growth as far as possible. to sum up our approach to the complexity problem : we are looking for ways to simplify requirements for small firms which, as a package, will reduce the costs of regulation without reducing firms ’ resilience. i will now move on to the question of how that can be done. streamlined or focused it ’ s possible to imagine two approaches to creating a simpler regime. one approach would see us sitting down with the current rule book and, working through it pen in hand, striking or simplifying out those parts which aren ’ t needed for non - systemic banks and building societies. the result would be a thinner version of the current rulebook with the same chapters but fewer words. that is what i will call a ‘ streamlined ’ approach because it would deliver a streamlined version of current requirements. the other approach would have us starting with a blank page and identifying the minimum number of requirements needed to maintain small firms ’ resilience. in this case, the result would be a completely different rulebook with different chapters. i will call this the ‘ focused ’ approach because it would be solely focused on the risks faced by eligible small firms. what are the implications of choosing one or other of these approaches? you may have noticed that i have spoken so far about the complexity of requirements, but not their calibration. that is because questions about the level at which requirements are set can only be properly addressed once an approach has been chosen. this is a natural consequence of our commitment to maintaining current levels of resilience. as i said earlier, this means that when we simplify some aspects of the regime we may need to tighten others. that tightening might take the form of increasing the calibration of remaining requirements. one might for example