“ one strike and you are out ” regime for an honest mistake. neither explicitly nor implicitly. not i as governor, not the ceo of the pra, not the head of the fca. not any of our supervisors in the pra. the smr is about clear responsibilities, proportionate consequences, and developing a culture of openness and accountability. proportionate means taking into account the severity of the incident, the track record of the individual and their firm, as well as the firm ’ s wider response. an honest mistake that is freely admitted for which a firm takes prompt remedial action is not a firing offence. and here ’ s my point : we must not let recent events inadvertently tighten perceived standards for the industry because that could have senior managers running scared, drive compliance underground and undermine for tsc report see : https : / / www. publications. parliament. uk / pa / cm201617 / cmselect / cmtreasy /... / 1092. pdf all speeches are available online at www. bankofengland. co. uk / speeches our collective objectives. another risk, flagged by some, is that it will also become harder to find candidates of sufficient calibre willing to take on senior roles. this is why last week i spoke with the ceos or chairs of all of the major banks to reiterate our expectations as regulator. i ’ m glad i did because they were all concerned about precisely such unintended consequences. the best in the industry are committed to making the smr work – not because they have to – but because a regime with clear responsibilities, proportionate consequences and a culture of openness helps to build the culture that will over time help regain trust for the industry. conclusion changes to incentives, new codes and a clearer mapping of responsibilities will all help improve conduct and lay the groundwork for better culture. of course, integrity can neither be bought nor regulated. even with the best possible framework of codes and principles, the soundest compensation schemes, and the most committed efforts to improve transparency, financiers – in both the public and private sectors - must consistently challenge themselves and the standards they uphold. we are seeking to raise expectations and norms by using a combination of hard and soft law, with much of the latter developed by the private sector. the best view finance as a profession with a purpose to serve their clients. they see themselves as custodians of their institutions, with

euro weakness. we don't of course have a crystal ball. but even if we had, it is important to recognise that the link between relative interest rates and exchange rates is much more complicated - and indeed more unpredictable - than is often suggested. our own exchange rate against the euro today, for example, is actually somewhat stronger than it was before our reductions in interest rates this year ; and the dollar, too, is substantially stronger against the euro than it was before the much larger cuts in us interest rates. so, in setting interest rates, we can - and do - make allowance in our projections for what has happened, and, on a best guess, for what is likely to happen, to the exchange rate, and that may cause the exchange rate to soften or it may cause domestic demand growth to strengthen, thereby offsetting the exchange rate's dampening effect on the economy. but what we cannot do is to target the exchange rate, without putting the stability of the economy as a whole at risk. the exchange rate is just one example of the many uncertainties that confront us in our pursuit of the government's inflation target. we do not know, for example, with any great confidence what is happening in aggregate on the supply - side of the economy, nor therefore precisely what rate of growth we can expect to sustain. we can observe that there has been less price pressure in both goods and labour markets given the strength of demand in those markets than past relationships would have suggested and we can try to understand the reasons for this change. but while we do in fact make some allowance in our projections for the more benign relationships to continue, we do not actually know very much about the size of the improvement or whether or not it will persist. there are familiar uncertainties, too, about the prospective strength of domestic private sector demand growth, which remains quite robust for the time being, but which could be adversely affected by confidence effects from developments elsewhere, and which may in any event need to moderate to accommodate the planned acceleration of public spending. and substantial new uncertainties have emerged more recently, relating in particular to the extent and duration of the slowdown in the united states and to the associated weakness of equity prices, and their potential impact on our economy, as well as to the direct and indirect effects of our own outbreak of foot and mouth disease. the list could go on. but please don't think i'm complaining. we are paid to look ahead as best