a way that avoids significant disruption to the supply of critical financial services. nevertheless, failure is not costless and there is inherent uncertainty about whether a firm can fail without damaging the financial system and the supply of critical services. consequently, the pra will expect a given level of resilience to failure from all firms. there is another major public interest in the banking system, namely that by becoming too big to fail, the largest banks have developed an implicit, and in some cases explicit, dependence on public money. this is unwelcome, for the public, and for the banks, the former because of the unwanted cost, and the latter because of the intense scrutiny and oversight of the banks, which must be more intense as long as this state of affairs lasts. now, i recognise that we have a lot to do still on resolution planning to be comfortable about our objective of avoiding a no failure regime and thus solving the too big to fail problem. for large banks, we are making progress on resolution planning, and this world is different to five years ago, but we are not there yet by any means. i have a background in resolving banks, and i regard having the capacity to resolve failed large banks – including the largest – as the holy grail of resolution. unlike the legendary holy grail, i think there is a good reason to believe that the objective of being able to resolve large banks that fail can be within our grasp. i am very clear that when firms mess up, they should be allowed to fail, and by doing so they are putting at risk the money of their shareholders and if necessary after that those who provide debt funding according to levels of seniority. but i am also very clear that really achieving the objective of avoiding a no failure regime requires a fundamental change of mindset both inside firms, the authorities and in society more broadly. fear of failure is an important conditioner of behaviour in a financial regulator, and achieving a change on this front depends on establishing a wide acceptance of our approach that orderly failure which does not compromise our public policy objectives is an acceptable outcome. bis central bankers ’ speeches to be clear, we should be criticised where failure compromises those objectives and we could have taken steps to avoid it. but if failure is orderly, and does not compromise our public policy objectives, the responsibility should rest with the board and management for failing to serve the private interest of their shareholders and creditors. last on the theme of failure, having firms that are either too

jon cunliffe : pay and productivity – the next phase speech by sir jon cunliffe, deputy governor for financial stability of the bank of england, at the automative fellowship international dinner, luton, 22 june 2015. * * * between 2000 and 2007, the average worker in the uk automotive manufacturing industry produced 7. 7 vehicles a year. over the past seven years he / she averaged 9. 8 vehicles a year. productivity – output per worker – in car manufacturing has increased by 30 % since the onset of the great financial crisis. britain has become the fourth - biggest vehicle maker in the eu and is more efficient than bigger producers such as germany and france. it has not all been plain sailing. in the recession, productivity in the car industry fell as firms cut back production and held on to workers. but productivity in the industry recovered quickly. if productivity in the uk economy as a whole had grown in the same way as in the car industry, and employment generally had grown as it did, the economy would now be 30 % or £½ trillion larger than it is today. annual gdp per person would be about £8k higher than it is. unfortunately productivity in the uk has not followed the lead of the car industry. indeed, the opposite is true. in 2014 labour productivity in the uk was actually slightly lower than its 2007 level. in the seven years between 2000 and 2007 labour productivity grew at an average annual rate of about 2 % a year. in the seven years that followed, our annual productivity growth averaged just below zero. or to look at it another way, the level of labour productivity – output per hour worked – in the uk economy is now 15 % below where it would have been if pre - crisis trends had continued. of course, a hit to productivity is what you expect to happen in a financial crisis and deep recession. firms cut production but try to hold onto workers. but even compared to the experience of others, the uk ’ s productivity performance has been disturbingly weak. it is true that the average output per hour of the rest of the g7 advanced economies is only around 5 % above its pre - crisis level. but as i have noted, in the uk it has not even recovered to that level. and in 2013 output per hour in the uk was 17 percentage points below the average for the rest of the g7 – the widest gap since 1992. i am very conscious that in talking about the importance of productivity growth before this