create their own challenges. but, what is meant by the idea of resilience? a resilient financial system has the resources and flexibility to respond to a range of shocks of different sorts. in doing so, it will support stronger growth over the long - run, helping the economy to bounce back and reducing long - term economic scarring caused by the shock. in other words, shocks will be easier to absorb and manage if the fundamentals are sound beforehand. there is an important choice to be made on where to set the degree of resilience, in other words where in the bad tail of the distribution of outcomes. the answer depends on the objective, in this case the public policy objective, and in our work this is one of the key innovations of macro - prudential policy over the last decade. it is not just to prevent the failure of institutions, but rather to ensure for banks that at the chosen level of resilience they can support lending to the economy, to firms and households. of course, there are points in the tail of the distribution beyond the chosen point and it is for those that we have resolution tools. there is a gross cost to resilience, for banks the cost of increased capital 1 / 3 bis central bankers'speeches and liquidity buffers. but that cost should be suitably offset by the benefits, to the economy and to firms themselves. setting the chosen point of resilience must of course be consistent with the cost - benefit case1. putting this notion of resilience into practice in the world of financial stability has been the work of the post global financial crisis years, and will never be done in the sense that we must allow for and respond to innovation. there are two central planks to this work : first, to provide a strong counter - cyclical capacity. this means that banks are able to lend through severe economic downturns, insurers can maintain underwriting capacity in the face of a wide range of severe shocks, and financial markets are able to function, as they adjust to shocks, including the infrastructures in markets that are at the heart of the financial system in the post - crisis reforms, notably clearing houses. much of that functioning also relies on the second plank of resilience, namely structural measures which are not designed to vary in a counter - cyclical manner, but instead apply equally at all times. for banks, this means minimum capital and leverage ratios on top of which sit buffer

##s which are there to be used counter - cyclically in times of stress. consistent with the idea of resilience, there are two key questions to ask about the buffers : are they sized consistent with the financial stability objective ; and are they in practice usable in times of stress? we have to keep both of these questions under almost continuous review. post - brexit, it is necessary that we review and, where appropriate, revise the regulatory system to make it consistent with our uk specific objectives. when i say uk, however, we must recognise – as thecityuk does – that we are a leading global financial centre. so, our financial stability objective is a global public good, as the imf has previously noted. we must therefore continue to be closely involved in shaping international standards, and then implement them properly. i can assure you that we are doing both of these. moreover, when we decide to revise inherited eu standards, we must ensure that they meet our public policy objectives. let me briefly give solvency 2 as an example – no after dinner speech should contain anything more than the briefest description of solvency 2. at the heart of the prudential regime for insurers in the uk are the objectives of safety and soundness and policyholder protection. how we put those objectives into practice should also encompass any macro - prudential measures that we consider appropriate. i do not for a moment consider that the solvency 2 we transposed from eu law and regulation is best suited to the uk. why would it be, since it was designed to cover 27 countries? the case for reform is clear. but, so is the need first to ensure we define and set our expectations on safety and soundness and policyholder protection. then, consistent with these expectations we can look to enable more support from insurers for productive finance and infrastructure investment etc., that way we can ensure a resilient approach to the prudential regulation of insurers and so stability in the supply of finance. resilience is also highly relevant to the international financial system and the approach to international regulatory standards. i want to finish by commenting briefly on one aspect of this. in my view resilience is best achieved and maintained through an open and well - governed international financial system. we came to a key moment in time on this issue during the global financial crisis. given the severe stress, and how it was transmitted across borders, it would have been