Sam Woods: Good cop/bad cop

Speech by Mr Sam Woods, Deputy Governor for Prudential Regulation of the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), at the Mansion House City Banquet, London, 25 October 2018.

Central bank speech  | 
30 October 2018
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Lord Mayor, Ladies and Gentlemen,

Andrew and I have worked together for a long time, and we've often found it useful to adopt a regulatory good cop/bad cop routine. In the context of Mansion House, the rules are simple: whoever gives the shortest speech is good cop! Now Andrew I timed you just now, and with a few edits I think I can sneak in under the line-

But why am I talking about the police at all? Police metaphors are dangerous, but as it happens "good cop/bad cop" is a good analogy for two different aspects of our role as regulator:

ï‚· First, bad cop: areas where we need actively to insert the public interest into privately or mutually-owned firms, because some of the costs of their failure would be externalised and they therefore have an incentive to run too much risk. Here there is inherently a degree of conflict between regulator and firm - it is the way our system is set up. Capital is the most obvious example of these battlegrounds, where reasonable people with different objectives quite naturally come to different answers. But there are many others.