big or too important to fail is bad for competition in the industries that we regulate. an industry where exit is too difficult is one where entry is likewise inhibited. this is what we see in the banking industry. embedding resolution into the public policy objectives of financial regulation matters for two reasons relevant to competition : first, because, to repeat, exit enables entry ; and, second, because if, as we will, we require new entrants to satisfy us on their resolvability in order to be authorised, we will lower the barriers and costs of opening for business. put simply, if we don ’ t know how to deal with a failed firm, we will inevitably set a higher barrier to entry. we have already started to put this new approach into operation. resolution of failed firms consistent with the public policy objectives is one key plank of the new approach to financial regulation. another key plank concerns the macro prudential approach to regulation. the legislation has formally established the financial policy committee ( fpc ) charged with the primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the uk financial system. the fpc also has a secondary objective, to support the economic policy of the government, including its objectives for growth and employment. the root of the introduction of macro - prudential regulation sounds quite obvious, which is to take into account the impact of financial regulation on the functioning of the real economy. obvious you might say – yes, but it wasn ’ t done in the past. macro - prudential regulation is focused on protecting the financial system as a whole. it is quite simply about ensuring that financial regulation is conducted with an eye on the state of the economy. in a very big picture sense, there is nothing new about this activity. the problems of the last five years have emphasised the close links between the health and behaviour of banks and the condition of the economy. this is a lesson of history, and one that should not have been forgotten. but, forgotten it was. a clear objective of macro - prudential policy is to act in a countercyclical fashion – to restrain booms by acting to tighten regulation, and to seek to dampen the impact of busts. unfortunately, the record of the past shows that the behaviour of regulators has not been consistent with these objectives. the crisis illustrates the dangers of not applying restraint in what appeared to be good times

is almost a year since we designed and began the implementation of the current fls. that was done against the backdrop of a much more febrile environment in the euro area in terms of sentiment and a real concern that the risks arising from the euro area situation were affecting the costs of funding for uk banks and therefore their lending and the economy more broadly. alongside that evidence, we could see that the sum of the projections for lending in the two years ahead for the uk banks was substantially negative. the case for acting was therefore strong, but the challenge was also that in its first year, success for the fls was in some ways to prevent the most negative outcome for lending, which in an absolute sense would not look great. what we have seen over the last year is quite a substantial change in the funding costs of banks which has fed through into lower lending costs, but more so in terms of the amount of lending in the mortgage market than for small firms. funding for the major banks have also become less disposed, which has probably increased the willingness of banks to compete on lending. but the uneven pattern of lending meant that we thought it was sensible to increase the incentives for banks to lend to small firms. we cannot say that this will conclusively deal with the question of whether the problem is a lack of loan supply or demand, but we can say that we have used our toolkit to create a big incentive for banks to lend to small firms. in summary, there is a strong public interest in the banks, which has been sharpened by the crisis. one element of that public interest is permanent – the role of banks in supporting the real economy. another is permanent, and like the first should be in the category of a given – namely, good conduct by banks. but the third – the dependence on public money – should not survive, hence the strong focus on developing bank resolution and ending too big to fail. president, we all have our work cut - out. you can take pride in the role of the institute in supporting the establishment of the professional standards board and their work on the code of professional conduct and the professional standards initiative. as a start, i understand that at least 70, 000 bank staff will go through the foundation standard by the beginning of july this year. this is a big achievement, for which those involved should be proud. there is a lot more to do i know, but let me congratulate susan rice, who has led the work, and everyone else