bank of england competing for growth − speech by sam woods given at the annual city banquet, mansion house 17 october 2024 bank of england speech regulation, competitiveness and growth a lot has been said about the uk financial regulators ’ new secondary competitiveness and growth objective, so i hesitate to add to the chat. 1 our focus is on actions because they are said to speak louder than words. however, it is regularly reported to me that some stakeholders doubt that we are taking any meaningful action to deliver our new objective – and from this i have learned that sometimes in life it is necessary to tell people what actions you are taking, as well as taking them! i will also attempt a little myth - busting, because i have observed that the debate on regulation can be dominated by extremes. on the one hand, it is surprisingly often asserted that the regulators are trying to remove all risk from the system and don't care about their impact on the wider economy. it is easy to demonstrate that this is nonsense. on the other hand, it ’ s simply not true that any change to our regulations will unleash financial mayhem, and there is plenty in our regime that can be improved without undermining stability. so if you take only two things from this speech, i hope they are these : • first, that we are strongly committed to our new objective, and are taking concrete steps to improve our regime ’ s contribution to uk growth and competitiveness ; • and second, that we are going about this in a careful, balanced way – reducing bureaucratic processes and some excess conservatism while preserving financial stability. before getting into this, i ’ d like to make a more personal point. it has occasionally been suggested that we regulators don ’ t like our new competitiveness and growth objective, are secretly opposed to it and will do as little as possible to deliver it while talking a good game in public. as it happens, in my own case – other than talking a good game in public, which i do regularly attempt with mixed results – this view is completely untrue. i have always thought it perfectly reasonable that if we take an activity – rule - making – which has for many decades in this country been largely done under direct political oversight because that is the way the eu system works, and give it instead to operationally independent regulators – then the regulators ’ objectives need to be adjusted to take account of that 1 to quote the statute : ‘ the competitiveness and growth objective is

we should certainly use the monetary and credit aggregates that give the best projections of financial conditions for a given structure of the financial services industry. but how to go beyond that is a matter of considerable complexity. though i share the importance of the policy goal, it should be clear that how to define the objective function is not only analytically difficult, but it would also pose serious institutional challenges. for a central bank whose primary mandate is to preserve price stability alone, introducing financial stability as an additional objective could introduce a trade - off where none exists today. indeed, at times of extraordinary volatility and dramatic risk re - pricing, maintaining price stability could be the best contribution that monetary policy could give to the return to financial stability. the same remains true during peaceful times, when prolonged periods of double digit growth in several credit aggregates should call for action to protect future price stability even if in absence of an immediate danger. second, i can only point at the difficulty of having a framework that is as clear and measurable as the one we have today for our monetary policies. but where i see the greatest difficulty is in the amount of information that would be needed in order to run a monetary policy having financial stability among its objectives. in other words, we would have to know about both the regulated and the unregulated parts of the financial services industry as much as we know about inflation and output. of course this would also be the area where, were we to move in this direction, the benefits from enhanced transparency and interactions with regulatory policy would be greatest. in conclusion, the next few years are likely to be ones of low risk - taking and progressively low leverage, as financial institutions and households repair their balance sheets and as internal and external macroeconomic imbalances are resolved. these adjustments will not be painless, and ensuring that they take place in an orderly manner will pose substantial challenges for policymakers : preserve price stability while supporting growth, and continue injecting liquidity as needed by an industry that is still far from having resolved its problems, at a time of strong inflationary pressures and tightening credit conditions. in such a situation, monetary policy cannot be the only, or even the main tool for reflating the economy and the financial system. fiscal policy will have a key role to play, in its various configurations. but equally important would be to recreate an environment where banks during this current transitional period were both able and willing to use their buffers to lend, and capital markets