Victoria Saporta: The ideal post-EU regulatory framework

Speech by Ms Victoria Saporta, Executive Director for Prudential Policy of the Bank of England, at the International Business & Diplomatic Exchange 2020 Annual Conference, London, 10 March 2020.

Central bank speech  | 
26 March 2020

A lot has changed since the last global financial crisis. Banks are much more resilient. The PRA has authorised 18 new banks in the past five years, with further banks in the pipeline to be authorised. The role of non-banks and market-based finance has been growing. And digitalisation is transforming a number of financial services.

In spite of these changes, the fundamental market failures that justify the need for prudential regulation remain. This is because financial firms can take actions that create "negative externalities" - jargon for someone making bets that hurt innocent bystanders when they go wrong. And in the case of "systemic" negative externalities they hurt the economy at large, as the Great Financial Crisis reminded us. Equally, these market failures need to be dealt with in a manner that does not introduce frictions that hurt innovation and long-term productivity and economic growth.