Sam Woods: Clinical supervision
Text of The Henry Thornton Lecture by Mr Sam Woods, Deputy Governor for Prudential Regulation of the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), at Bayes Business School, London, 12 May 2026.
Deep in the bowels of all major financial sectors you can find a group of people toiling away under the banner of "prudential regulation". Sometimes they are found within central banks, so are descendants of Henry Thornton after whom this lecture is named. Sometimes they form their own agency, or are part of a wider regulator. They are usually charged with ensuring the safety and soundness of banks.
But "prudential regulator" is something of a misnomer. One function of these bodies is well-known, and relatively easy to describe and observe - these people regulate, meaning they set rules for banks to follow, in much the same way as regulators do in other parts of the economy.
The other main function is more surprising. Not only do they regulate banks, but many of them also "supervise" them. This is a relatively interventionist activity compared to the monitoring functions of many regulators, and one which is rather unusual in a capitalist economy. It is also much less observable, which may explain why it has received much less attention from academics. It is also notable that - at least in the UK - some elements of this supervisory activity are beginning to be exported to other areas of the economy such as energy and water. Given this it seems a good moment to pause for a moment and consider what bank supervision is, why we do it, why it looks the way it does, and where it might go in the future.