threaten the system. The implicit state subsidy for banks needs to be removed. Todo that, we need also to make the ICB proposals a reality and to establish a full andcredible resolution regime to sort out failing banks without recourse to the taxpayer.
Third, the Bank must, through the FPC, establish macroprudential policy as acomplement to microprudential regulation. We need to embed a culture thatassesses emerging vulnerabilities, stress tests the financial system, and monitors theboundaries of what activities are and are not regulated. The FPC needs to questionwhether, even if individual firms are doing the right thing, the system is structured inthe most resilient way.
Fourth, the Bank needs to continue to develop its market operations, building on therecommendations of the recent reviews by Bill Winters and Ian Plenderleith, so thatthose operations provide an effective liquidity backstop for the system in a way thatdoes not encourage excessive risk-taking.
Finally, as with price stability, the international dimension to financial stability meansthat the Bank will need to engage with European partners, including the ECB, EBA,and the ESRB to develop an effective working relationship between authorities. TheBank must continue to play an important role in ongoing efforts to develop a moreresilient and efficient international financial system (consistent with the FSB prioritiesdescribed in response to question 17).An overarching policy challenge for me as Governor will be to maximise the synergies fromthe Bank’s broad responsibilities, particularly through its new committee structure, while fullyrespecting the primary responsibility of each body. For example, the FPC can be aneffective complement for the PRA, and both the PRA and the FPC can maximise theeffectiveness of monetary policy stimulus, while minimising emerging vulnerabilities in a ‘lowfor long’ environment.
Transformed responsibilities will mean a transformed institution. The priority challengeshere will be that:
A clear shared vision for the Bank needs to be established, synergies from thecollection of policy functions maximised and the expanded senior management teammelded into a cohesive unit.
Succession planning and talent management will be paramount. The Bank will needto attract, retain and promote an assertive, engaged, accountable staff at all levels.The Bank should develop its team culture that promotes timely, well-researched andconsensus-based decisions.
The Bank will need to build an effective, efficient central support function to serve allareas of the expanded institution and fully leverage a new organisational structure,including a new Chief Operating Officer role, to ensure value for taxpayers.
The Bank must realise fully the complete potential of the accountability andgovernance changes instituted in the Financial Service Act to enhance the credibilityof, and trust in, the institution.Throughout, the Bank should reinforce its existing culture of excellence as a learninginstitution that engages with academia, other central banks and private sector experts in thepursuit of its core objectives.
M. Carney, “Living with Low for Long” (speech to the Economic Club of Canada, Toronto,13 December 2010).