andrew g haldane : turning the red tape tide remarks by mr andrew g haldane, executive director, financial stability, bank of england, at the international financial law review dinner, london, 10 april 2013. * * * regulatory and legal frameworks share common roots. both are complex, evolutionary systems, shaped by history. they are the result of a set of well - intentioned historical actions by technicians charged with filling cracks, creating certainty, shaping incentives for the common good. both legal and regulatory frameworks have many of the characteristics of a classic public good. but the cumulative consequences of even well - intentioned actions may not always deliver outcomes which necessarily serve society well. that is because such actions are typically a response to events and circumstance. the resulting frameworks have a history of pathdependence ( david ( 1985 ) ). this history - dependence may “ lock - in ” sub - optimal technologies, such as qwerty keyboards and vhs video - recorders. the financial regulatory framework may be another example of a locked - in technology. the events which have shaped the evolution of financial regulation include crises, scandals, innovation and liberalisation. each has elicited a response, typically the addition of a new regulatory layer. the cumulative consequence has been a regulatory tide which has tended to flow in only one direction – towards a lengthier, more complex rulebook. in this respect, financial regulation shares many evolutionary characteristics with elements of the legal framework – for example, the tax code. it too has been responsive to events and circumstance including crises, scandals, innovation and liberalisation. and for many of the same reasons, it too has resulted in a rising tide of rulebook complexity. the facts are striking. in the uk, the banking act ( 1979 ) covered 52 sections and 75 pages. by the mid - 1980s, the financial services act ( 1986 ) and an updated banking act ( 1987 ) had expanded primary legislation to 110 sections ( 106 pages ) and 212 sections ( 299 pages ) respectively. the financial services and markets act ( 2000 ) took this to 433 sections or 321 pages. and the new financial services act ( 2012 ) takes this to 695 sections or 534 pages – a tenfold increase in primary legislation in a generation. in the us, the picture is no less dramatic. contrast the legislative responses in the two largest financial crises of the past century – the great depression and the great recession. the great depression spawned the glass - steagall

act ( 1933 ) – perhaps the single most important piece of financial legislation of the 20th century. that ran to a mere 37 pages. more recently, the great recession has spawned the dodd - frank act ( 2010 ). it runs to 848 pages or more than 20 glass - steagalls. once completed, dodd - frank might run to 30, 000 pages of rulemaking. the tax code has followed a similar evolutionary trajectory. in the uk in 1997, tolley ’ s tax guide ran to around 5, 000 pages. by 2009, it had reached over 11, 500 pages ; just two years later, 17, 795 pages. that is a threefold rise in less than 15 years. in the us, the federal tax system is celebrating its centenary. in 1913, us federal tax rules summed to 400 pages. by 1945, this had risen to 8, 200 pages, by 1974 to 19, 500 pages and by 2000 to 46, 900 pages. in 2013, us federal tax rules amounted to 74, 000 pages. that is almost a two hundred - fold increase over a century. viewed through the lens of history, it is not difficult to explain this evolution. as cracks have emerged in the plaster – for example, regulatory and tax loopholes – they have been papered over. like a bad painter and decorator, new layers have been applied to support the bis central bankers ’ speeches layers below. these were rational responses to real problems. and for a time they will have filled cracks, reduced uncertainties, corrected incentives. yet this evolutionary path leads inexorably towards a framework – whether regulatory or tax – which is a patchwork of make - do - and - mend. history locks in the idiosyncrasies and complexities of the past, generating a steadily rising tide of red tape. as the regulatory and tax codes attest, the resulting frameworks can be byzantine in their complexity and heathrobinson in their design. for three distinct reasons, this patchwork may not serve society well. first, maintaining such a framework is a high - cost activity. in financial regulation, it makes for a steadily - rising standing army of regulators and compliance officers. in the us in the 1930s, there was roughly one regulator for every three banks. today, there are roughly three regulators for every us bank. in europe, the cost of implementing basel iii is estimated at over 70, 000 full - time private sector jobs ( harle et