in place a framework for financial stability to parallel that for monetary stability. we need both. as we have seen, one without the other is not enough. just as the role of a central bank in monetary policy is to take the punch bowl away just as the party gets going, its role in financial stability should be to turn down the music when the dancing gets a little too wild. still, we should not put all our faith in regulation. it has limits. if the structure of banking creates incentives to take excessive risk then regulators will be overwhelmed by the avarice so vividly captured by michael lewis in his book the big short. incentives must be right. one misalignment of incentives today is the implicit guarantee to banks that are “ too important to fail ”, so that creditors have little incentive to monitor the behaviour of banks because they believe they will be bailed out. this problem is too important to ignore. there is no one simple solution. but we should not shy away from radical reform just because of the opposition of vested interests. so i welcome the setting up of the banking commission, with its talented commissioners and a wise and forensic chairman in sir john vickers. let me now return to the quiz question i posed earlier – to what question is 23 the answer? several plausible answers come to mind. first, 23 is the number of players in england ’ s world cup squad in south africa. second, it is of course 23 years since england last won the ashes “ down under ”. but neither of these are the right answer which is that 23 years is the age difference between the chancellor of the exchequer and the governor of the bank of england. in case there is any doubt, george is the younger. this age difference is highly desirable because the appropriate incentives are to allocate the responsibility of determining monetary policy to the older generation, which has a real interest in preserving the value of money, and the responsibility for fiscal policy to the younger generation, on whom falls the burden of excessive debt. if we are tempted to leave a large burden of debt for the next generation to pay back, what better incentive mechanism than to have as chancellor someone who has a longer life expectancy than any previous chancellor on record? given those incentives, chancellor, i look forward to a harmonious coordination of monetary and fiscal policy. lord mayor, as we prepare to toast the bankers and merchants of the city of london, all of us here tonight would like to pay tribute to your charitable work since you

at the same time, this credo should not prevent us from thinking about whether, and if so where, we can cushion any additional operational outlay caused by time pressure. a transitional period, at least as outlined in principle in march, could help with this. it would lower the long - term costs of exit by allowing firms to reflect on their options and decide which markets they want to operate in and which organisational structures would best allow them to strike the right balance between compliance and profitability. however, we cannot count on there being a 1 / 5 bis central bankers'speeches transitional period right now, since negotiations could break down at any time. 3 supervision of future third - country institutions : requirements and cooperation but whether or not there is a transitional period, one thing is certain : what standards apply to the future third - country institutions will ultimately boil down to how they are treated by the relevant supervisor after brexit and how the authorities will work together in this context. to shed light on this issue, the ssm has already adopted a whole bundle of supervisory policy stances. however, in the ssm, our baseline assumption is still the worst case, ie a no - deal scenario. and judging by recent developments in the united kingdom, this seems more than appropriate. with the next meeting of eu heads of state or government fast approaching, it doesn ’ t look like solutions to a number of quite fundamental issues concerning the future partnership will be found any time soon. the border with northern ireland is just one of these sensitive topics. this means that a huge package of agreements would have to be hammered out at the next summit but one in october, which would then, in turn, have to be reviewed by the parliaments in the shortest of timeframes. and even if this all went smoothly, it would be no more than a framework that would have to be fleshed out in detail to forge a future treaty – which would itself take many years. and because a breakdown in negotiations – and therefore a hard brexit – remains possible at any time throughout the entire process, enterprises should be prepared for this. that is why we banking supervisors are so concerned that a number of banks are easing off in their efforts to establish a licensed and operational entity in the eu or uk in good time ahead of march 2019. let me say in no uncertain terms that these institutions cannot rely on our leniency. we expect all banks to make provisions for a hard brexit. and that