loomed large in that debate. like mr. pecora ’ s, andy ’ s investigations were prompted by a dramatic financial crisis. unlike mr. pecora, andy lacked a specific parliamentary mandate. he investigated out of his own initiative from his office in threadneedle street : first as the head of the systemic risk assessment division ; then as executive director for financial stability ; and finally, since june 2014, as chief economist and member of the monetary policy committee of the bank of england. along this path, by the way, andy also managed to get a nomination by time magazine as one of the 100 most influential people in the world in 2014. it is certainly fitting that the first edition of this prize is going to someone who, like ferdinand pecora, has helped us think through the potential, the objectives and the pitfalls of financial regulation. andy ’ s contributions have been many and diverse ; i won ’ t be able to do justice to all of them. in 2009 andy denounced the perils of an increasingly tight and potentially asymmetric relation between banks and the state. 2 his thoughts had wide resonance in the banking world. we always knew that the relationship between banks and governments is tricky. however, the lehman collapse and then the european sovereign debt crisis brought the debate on ‘ too - big - to - fail ’ ( tbtf ) and systemic externalities to a new level. andy played a significant role in this debate. the issue of the ‘ right ’ size of banks is one that andy tackled more than once, from different angles. 3, 4 one of his key contributions was to remind us that diversification and diversity are not the same thing. size and scope increase the benefits of diversification, so big banks ( that is, larger portfolios ) ought to be highly diversified and less prone to idiosyncratic risks. but global banks that are fully diversified cannot logically be diverse : they must hold the same portfolio. and this means alessandri p, haldane ag, banking on the state, september 2009. haldane, ag, the $ 100 billion question, march 2010. haldane, ag, on being the right size, beesley lecture at the institute of directors, london, 25 october 2012 ( then published on the journal of financial perspectives, 2, 1, 2014 ). that they are likely to be more prone to a systemic collapse after a very bad aggregate shock. a simple look at what happened to some large

growing appeal in academia, and was adopted and powerfully advanced by a banking industry eager for deregulation. eventually, the pendulum swung all the way to the other extreme, not just in one country but globally. at some point, minimum capital ratios seemed to be all that was needed to safeguard financial stability ; beyond that, the markets were assumed to know best. 1 financial innovation in the industry, coupled with the somewhat insouciant attitude of ( some ) supervisors, especially about the quality, i. e. the loss - absorbing capacity, of capital instruments ( and a neglect for liquidity regulation, and a vast overestimate of the modellability of trading - book risk, and much else ), paved the way for a seemingly golden era of impetuous growth in finance, flourishing the bank of italy was a rather reluctant follower. we always kept stricter requirements on the composition of tier 1 capital than was mandated by the basel accords, and maintained for some time our own maturity transformation rules. on the latter, i regret to say, at some point we felt unable to go against the tide and formally abolished them in 2006. however, we still kept an eye on risks linked to maturity mismatches, and italian banks were never allowed to go for a northern rock - style mismatch. innovation, mind - boggling complexity of instruments and transactions, and very fine profits for banks. we know how it ended. the shock of the crisis called for a rethinking of a purely laissez - faire approach to finance. to some, the idea was a return to what could be termed the old, safe ‘ pecora way ’ : an about - turn towards glass - steagall and the concept of ‘ narrow banking ’. to most, it was rather coming back to the pecora method : a cautious, thorough assessment of the evidence, and a reappraisal of the fundamental trade - offs inherent in banking and financial regulation. andy has contributed to this debate in many ways, often bringing a fresh perspective. inquiring about the nature of financial regulation has been andy ’ s main field of interest over the past decade. one of the most important dimensions of the debate on optimal regulation is the trade - off between simple / rough / robust rules on the one hand, and a risk - sensitive / sophisticated / granular approach on the other ; andy ’ s memorable metaphors, and more importantly the reasoning behind them, have