Sam Woods: Looking both ways

Remarks by Mr Sam Woods, Deputy Governor for Prudential Regulation of the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), prepared for the May 2017 Building Society Association (BSA) Annual Conference, published on 10 July 2017.

The views expressed in this speech are those of the speaker and not the view of the BIS.

The theme of the BSA's conference is the future - the challenges and opportunities that lie ahead for building societies and what it means to be a modern mutual.  Now, being forward-looking is great and we have indeed built that into the most basic foundations of the PRA's approach.  But only looking forward would be unwise, given history's ability to repeat itself.  We need to look both ways.

In that context, I want to talk about supervision and why it matters - supervision, as distinct from regulation.  The two terms are often used interchangeably, but they are quite different.  Regulation concerns the framework of rules and legal standards which govern the way in which firms operate.  Systems of regulation, even if self-regulating, have been around for a good number of years in a wide variety of sectors, from media to energy to education. Supervision, by contrast, is the dynamic pursuit of the relevant authority's statutory objectives, through oversight of firms' activities.  To do this effectively, you of course need regulation - but one without the other in financial services would, in my view, be futile.