Reuters Insider - BoE's Carney to stick to QE call?

Fbc Holding

24/10/2013 19:40

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 Source:             Thomson Reuters                                   
                                                                       
 Description:        Bank of England Governor Mark Carney speaks at an 
                     event in London, ahead of Q3 GDP figures for the  
                     UK, which may boost his argument for halting QE.  
 
 
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 Transcript (May be auto-generated)                                    
                                                                       
 Thank you thank you very much Lionel. Thank you'll for being here. I think when you hear this speech you realized -- in the -- -- curator. Tia -- it's not to over the next 45 minutes -- will now expand. That. This is this is this is Central Bank stuff. The thrilling. Pros at the FT. I like to think yeah Michael. Thank all of you for being here. Think like bullies on the governing. The governor's fellow governors that thank -- truly be. And Andrew Bailey for being here. -- Testament to the serviceable Tucker 
 the last 33 years. And the three of us that Charlie Sanders myself. Wait in breathless anticipation for the arrival of officer John Cutler. In a few weeks time. So we're here to celebrate 125. Anniversary of the Financial Times. When the FT opened for business in 1988. London was the world's preeminent financial center. It had the most international banks and the largest capital markets the -- money in gold markets to back projects all over the world. And most of world trade was financed on bills drawn on 
 the London. Supporting the critical mass of banks insurers. And investors with an army of solicitors accountants and clerks. When London -- at least until the FT's great rival the financial news was founded in 1984. Was a ready provider of financial news. The FT famously set out to report without fear and without favor. And declared itself to be the friend. Of the honest financier. The respectable broker and the legitimate speculator. But the enemy of the close stock exchange the unprincipled promoter and 
 the gambling operator. And perhaps as a consequence its initial circulation was quite modest. Soon learned. To broaden the -- I think. The preoccupations. Of 1988. Were not very different than today. Editions of the FT that year contains stories on economic development in China. Spanish government finances and state of Irish banks. What's clear from those early editions. Is the decidedly international flavor. Of the London investors' interest from tram weighs in great stories to copper copper mines in 
 Portugal. Since then London has been a truly international financial center. In 1913 at the twilight of the last great wave of globalization. Fully 71 foreign banks and London offices. Today. Twice. A story today there are nearly four times as many. And twice as much international banking is done in London as anywhere else. The London is also the home to global markets as well as global -- Half of all the turn over an OTC derivatives markets takes place here. London share of global foreign exchange 
 turnovers almost as high and remains a major hub for trading in gold. UK insurance companies have about 10% of the global market. And extending the -- further the UK it's home. To the third largest shadow banking sector with total assets. Nine trillion dollars. And the emergence of London and as a global financial center in the nineteenth century. All of a lot to the UK's position as the world's greatest trading nation. Britain accounted for as much as one quarter of world trade then and produced about a 
 tenth. Global GDP. Over the ensuing a 125 years both of those shares fell two 3%. But despite some ups and downs London has remained global center of -- -- And partly as a consequence. The size of the UK financial sector relative. To its GDP is increased dramatically. When the FT was in its infancy. The assets -- UK banks were about 40% of GDP in today. And that ratio has grown tenfold. As we've recently been painfully reminded a specialized nation in financial services carries risks as well as rewards. And 
 those -- will grow unless we put global banks and markets on sounder footing. If we to suppose for example that the UK's. Banks that they maintain their share global banking activity. And at the same time that financial deepening in foreign economies particularly emerging markets increases in line with historic norms. By 2050. UK banking assets could exceed nine times GDP. And that's just of the UK banks and that says nothing but the potentially rapid growth of foreign banking and shadow banking here on the 
 now many would react to this prospect with four. They prefer that the UK financial services industry be slim down if not shut down. And in the aftermath of the crisis such sentiments. Have gone largely unchallenged. But if it's organized properly a vibrant financial services industry -- substantial benefits. Even today financial services accounts for a tenth of UK GDP. As a source of over one million jobs. Two thirds of those jobs are based outside of London whether an asset management and Edinburgh 
 transactions processing and born meth. Or insurance in -- Being at the heart of the global financial system also broadens investment opportunities for the institutions. That look after British savings. And it reinforces the ability if you -- manufacturing and creative industries to compete globally. Not to mention that financial services itself represents one of the UK's largest export. More broadly London's markets served a vital global role. London acts as Europe's windows to global capital. Is a center 
 of -- market finance. And can play an important role in the financial opening of China. -- -- the UK's financial sector can be both a global good. And a national asset. And it will be. If it's resilient. It's not for the Bank of England to decide how big the financial sector should be. Our job is to ensure that it say. UK can host a large and expanding financial sector safely. If we if we implement a reform agenda that extends well beyond domestic banking. Now that's not to suggest for a moment that the 
 focus on reforming domestic banks has been misplaced. Following the crisis. It was imperative to fix first fault lines at the core of our system. We've initiatives ranging from rebuild in the capital of the major UK banks and building societies. To change in the structure of compensation. And the responsibilities. Of senior officers. In tandem some banks are now working to change their cultures. But reforms of global banking are far from sufficient. The story reforms of domestic banking. Are far from 
 sufficient. For global hub such as London. And now's the time for greater focus on what's needed for resilient international banking and robust global markets. This will require sustained international engagement. Because unlike the early days of the FT. UK can no longer dictate standards. Rather than ruling the -- we must were collective action through international engagement. Through demonstrated commitment to openness and promotion of better ideas where they're at the European level. Or at the G-20 by 
 the financial stability -- More fundamentally such engagement would be timely because globalization itself is under siege. Cross border capital flows of fallen sharply since the crisis. And multilateral trade liberalization has stalled. To the detriment of global prosperity. -- were to stem that tide. Towards financial fragmentation in particular. We must make global finance more resilient. And that will serve both our national. And global interest. So accordingly I'm gonna concentrate today on three core 
 elements of the Bank of England's financial stability strategy. And they are creating resilient global banks. Building robust global markets. And conducting central banking for those markets. These initiatives support a fourth -- of our strategy which is improving the supply of finance in the UK. And you'll hear more about those supply side initiatives aimed for example -- rebuilding securitization. And supporting us in the lending in coming months. Let me begin with making international banks safer which 
 is of course fundamental to renewed globalization. To this send a lot has been done. Global standards for capital and liquidity have been agreed. The major global banks just the major global banks have already raised more than half a trillion US dollars of new equity over the course of the last few years. And they're on course is a group. To meet the exacting Basel III capital standards more than four years in advance of the deadline. In the UK. All major banks and building societies now have in place 
 credible plans to achieve. The Bank of England thresholds. For capital and leverage. Gotta finish the job over the next year international regulators. Need to agree new rules for capital. New rules for capital to tell the bank's trading books need to agree a simple leverage ratio. And we also need to agree and you guideline that governs the stability of banks' funding. Alongside these efforts to increase resilience our focus will be on solving the problem banks that are too big to fail. Systemic resilience 
 depends on being able to resolve failing banks in a way that doesn't threaten entire system. Fairness obviously demands that we in the system privatized gains and socialized losses. And simple economics dictates that the UK state cannot stand behind -- banking system that's already. Many times the size of its economy. Moreover with I wrote a credible means to resolve failing banks regulatory balkanization. Will continue. As national regulators seek to protect their own interests. Thus threatening the 
 efficient operation of international financial system and accordingly London's competitiveness. So in order to avoid these risk we may need to make the resolution of global -- a real option. This will require. Coordination and cooperation between authorities across multiple jurisdictions. And this will only work. If authorities are confident the global resolutions will deliver the domestic financial stability. And protect. Local banking services. That we need to structure cross border cooperative agreements 
 in these will help. But the final words in in those agreements need to be backed up by harsh economic finished incentives. And in this regard operating structures of banks must be made consistent with result ability. And above all banks must have substantial. Loss absorbing capacity. They cascades through their group structures. Now at the Saint Petersburg summit in September G-20 leaders mandated the FA SP to develop these proposals. And the Bank of England is now working intensively with other authorities 
 and with. Some in the financial services industry to do so. Our aim is to finish this job by the time of the next G-20 summit in prison. That by increasing the resilience of banks and tackling too big to fail. We can help make London a safe global banking center. But as -- -- in a moment ago that's far from some sufficient we also need to dramatically improve the resilience of markets. And in order to do so we need first to consider how those measures some of the measures I just talked about. To improve the 
 resilience of banks how they've affected the functioning of markets. It's true that the combination of higher capital. Ratios and higher capital will be held against trading books the new leverage ratio that's to be agreed. And in some cases in the US for example the proposed Volcker Rule. And restrictions on proprietary trading the culmination of those and other measures. Have already combined to reduce. Dealer inventories across the range of securities. With dealers less willing to deploy capital against 
 large market news volatility has increased in liquidity has fallen. When there's been shocks such is that which occurred over the summer over the potentials shift in US monitored calls. On the other hand. With limited proprietary positions banks generally emerge from this summer's stress unscathed. And certainly no one wants to return to the days when major dealers trading books were crushed under the weight of worthless structured products. So to strike a balance between making banks safer and maintaining 
 adequate market liquidity. We need to draw some lessons from the financial crisis. Particularly. Lessons from what happens when contagion. From stressed banks spread rapidly through the global financial system. By concerns about counterparty credit. By liquidity -- and ultimately nasty leveraging. It was in this environment that core funding and OTC derivative markets. Seized up and panic quickly follow. By contrast. Markets that had greater transparency in markets that had more robust trading and 
 settlement infrastructure. Such as equity markets and foreign exchange markets the exchange traded futures markets performed much better. Prices in these markets were not always two participants liking but importantly these markets remained open and they remain functioning. So argument is that London should given our position London should lead the way. In ensuring that fixed income and derivative markets -- such standards. At the FSB the Bank of England is helping to devise performs an increase 
 transparency. To build more robust infrastructure. And encourage better collateral management. And since collateral is that it is that the cornerstone of all this. And goes to the heart of central banking. Allow me to spend a few minutes. What collateral does is it reduces risk between market participants. And also in the same time supports market based sources of credit to the real economy. Collateral central to the functioning of OTC derivative markets remember these are notional terms 600 trillion dollar 
 market. And it's central to the funding of the shadow banking system. And since market based finance such as securitization. Needs good collateral to grow sustainably. It's availability directly influences. The supply of finance to British households and businesses. The use of collateral isn't without risk. When collateral values rise. Fixed haircuts a lot of banks and on banks to borrow more and that pushes up -- values further course -- reverse is also true. And it's inherent -- -- -- county exposes the 
 system to sharp corrections. Which in the extreme. Lead to a sell off in financial markets. Leading to higher haircuts a run on repo and -- ultimately. The market sees enough. So to reduce those risks the FSB at the Bank of England's encouragement. Has proposed minimum regulars regulatory standards for collateral valuation management. As well as the schedule. Proposed numerical Erica floors on repo transactions. If this -- is will soon require. Central clearing of standardized derivatives transactions to 
 limit exposures between counter parties. You know promote the efficient netting of positions and moderate and and all of this together will moderate collateral cycles. Then new minimum capital margin requirements for bilateral OTC trades. Will also protect banks from defaults and their counter parties and also reduce this pro -- county before the system. Some of that is to help keep markets open. So the culmination of these reforms though. Means that institutions particularly banks. Need both more 
 collateral and they need to manage it better. We're confident that financial markets. No other innovate and we'll do we'll do so. Already received investor expectations for liquidity change. And models for risk in remediation. Are expected to fall in ways that reduce balance -- usage. -- -- get to my third point before concluding which is what is central banks do in this environment and and and we clearly need to keep up. In particular. We can capitalize more efficient and effective private collateral 
 management buy back -- private markets. And going back a bit before they launch of the 5840. Years ago and Lombard street. Walter badgered by the end of Central Bank speeches complete with that it reference. Expounded the duty of the Bank of England. To lend freely to stem the panic and make loans on and I quote. Everything which in calm in times is good banking security. That it was particularly skating on the bank's failure at the time to state a clear and sound policy. On this general topic writing. And 
 tell we have on this point a clear understanding with the Bank of England. Both are liability to crises. And our terror pat crises will always be greater than they otherwise would be. A 140 years on the bank has a clear and sound policy. It's set out in the revised -- monetary framework which has just been published. The new framework builds on the lessons learned during throw the crisis. And it draws on the recommendations of the modern day budget bill winters. In his. Review of the system. They'll think 
 you're here in the country it's a compliment to. I could use more than five words to this driver approaching the moment but I mean useful life right now by simple words to describe her approach. Which is that we are open for business. The new Bank of England facilities are not ornamental they're there to be used. There to be used by banks to access money and high quality collateral. We're offering money and collateral on longer terms. The range of assets we will accept in exchange for. Those offerings will 
 be wider. Will extend and we'll extend that range of collateral to -- loans and in fact any -- we're capable of assessing the risk of the use of our facilities will be also be cheaper. In some cases the fees are being more than half. And banks can be confident that when they want to use their facilities. They will be allowed to access them. Because we are now both supervisor in the form of the hearing because we're both the supervisor and the Central Bank the strong presumption is now. But if a bank meets 
 the supervisory threshold conditions. And has signed up to our framework it will be able to use our facilities. Our discount window will be open every day for those firms are required to -- spoke facility. And we'll have lagged disclosure its price will be lower. We will hold monthly repo auctions to provide predictable and regular access to high quality collateral in exchange for a very broad range of collateral. And at times of actual or prospective stressed conditions we stand ready to provide cheap 
 plentiful money through more frequent auctions. Now none of this means that financial institutions are excused. From the need to manage their balance sheets prudently. But as bill winters himself observed. More exacting liquidity requirements mean that the conditions for using Central Bank facilities can be -- stringent. And therefore more effective. And this is one example of the synergies. They have rise from having supervision. Within the central. So with our announcements today we think we're building a 
 liquidity framework for the markets of tomorrow. And in the markets of today. Initially usage of these facilities are expected to be limited. And that's because the NPC stock of asset purchases. And the existence of the funding for lending scheme currently provide all the liquidity and collateral for the sterling system currently needs. But as those operations -- went down over time. We expect to see banks making increased use of -- permanent facilities. -- we think today's announcement is significant -- 
 certainly marks an end of process of innovation throughout the crisis and and and the response to. Bill's report. But it doesn't marked the end of history for the Bank of England's market operations. Will continue to evolve our approach as a financial sector changes in particular we need to think about and answered two big questions. The first is whether the banks to allow non banks to access our regular facilities. After all our responsibilities for financial stability run much wider than the banking 
 sector. And institutions that play a central role in markets such as broker dealers -- financial market infrastructure. For the obvious candidates. One thing to note though is if the scope of access the Central Bank facilities increases. The scope of regulation. Can be expected to expand. You know for proportionate there. Secondly the second question is given that we host an international banking system as well as global markets. We need to think about to what extent the banks should provide liquidity in 
 currencies other than sterling. As markets evolve and banks and markets here may need facts not in currencies. Of an easterly and in time zones other than those served by the Fed. And the Bank of Japan. At present. We can supplied limitless quantities of sterling that we have to rely -- other central banks for access to their currencies. In response to the crisis we built up a network could swap agreements amongst the major advanced economies central banks in order to provide that. And recently. We've 
 recognized that network of swap agreements should necessarily be limited to the G-7 economies. In June. My and my predecessor the Bank of England signs such an agreement with the People's Bank of China. And it's reflects the growing international rule of the renminbi. It dovetails with the possibility of establishing a renminbi clearing bank here in London. And it's also consistent with our. Broader policy of openness to hosting foreign wholesale banking activities which could include. Be could be extended 
 to branches. Chinese banks. Now helping. Internationalization. Of the Chinese currency is a global good consistent with London's historic -- But I want to assure you that the bank collected a manner that's consistent with its domestic responsibilities. As Michael again -- barely mentioned last week. Our risk appetite for foreign branches will largely be determined by whether their activities in the UK. Are covered by credible recovering resolution plants. As always renewing globalization and building 
 resilience. Go hand in hand. Some so let me conclude. By summarizing. After perhaps the worst financial crisis the FT's long lifetime it's reasonable to expect now. The financial services will again grow in importance. The process of financial deep -- in emerging markets is only just beginning. In Europe there's a strong case for greater reliance on market based finance relative to weakened banks. The U case stands to benefit from these trends. Because of London's place at the heart of the global financial 
 system. And properly structured. This will create investment opportunities for British savers. Reinforced trading ties for US workers for UK firms. And improve access to credit for the real economy across this country. London's international markets in turn provide. Vital services. To the global economy. And those benefits on both sides. Will be greatest as part of an open integrated financial system. The bank's -- the Bank of England's task. Is to ensure that the UK can host a large and expanding financial 
 sector in a way that promotes. Domestic financial stability. Only -- In that sector be both a global good. And a domestic asset. To those -- were working to complete the job of making banks more resilient. And tackling too big to fail. We're making markets more robust in order to turn shadow banking from the source of risk to a pillar of resilience. And we're changing how we backstop private firms. Liquidity management. And all of these efforts will help set the stage to further improve the supply of credit 
 within. You can. -- finish by putting my point a little more succinctly in the style of the FT 125 years ago. The Bank of England this might pitch to be a leader -- the Bank of England. Is the friend of Brazilian banks continuous markets in good collateral. And where the enemy of taxpayer bailouts fragile markets and financial instability. Our circle of friends. Like the FT's readership in its infancy. Is currently small. But it's expanding. And as it does. The UK will help to renew globalization. To the 
 benefit of all thank you very much. Well ladies and -- and I think we can all agree governor you've got killed. We're going to be in the spirit of the Financial Times in 2013. Both analogue what else can a couple questions of government and then digital and that we will be opening questions from the audience. Now governor you made you've given a vote of confidence in finance qualified cools on adequate -- Regulation. And making good performance as you know words robust and resilient. But I am tempted to. To 
 quote -- countryman who distinguish countryman. Wayne Gretzky. The eyes -- me I -- plan liability said that it's important when you're playing nice talking. To skate where the -- He's going not where the puck has beaten. And my my question is whether. Or best intentions. Regulators around the world not just of the bank and looking backwards and fighting the last war. And he excess leverage exception rather than looking to the next crisis. First -- very impressed by the U Wayne Gretzky. He's really 
 comfortable -- I think I identical things first. There -- a couple of basic lessons from finance and and and and the first is that. Ultimately leverage gets you in trouble -- -- that that lesson of warfare finances is is always -- related to that is. Problems. Soon arrive. When one sees sustained. Above trend borrowing and by any mechanism. But I would say without going into two mosquito that much time. That there is a huge swath of work and -- I didn't touched on which relates to the shadow banking sector 
 and and and the advantage of it is is not it's looking at economic function as opposed to going to specific types of institutions. So it's about whether -- collective investment vehicles whether -- Vehicles that facilitate. Credited munitions such as insurance. -- Marlins had insurance but such as as opposed to. Just going back to fix the model lines we're just going back in the first example to fix the suits which of course don't really exist anymore. And so that swath of work. Which is going to mature 
 over the course of this year. He is is that is the Gretzky work if you -- it's it's going to where the puck. Isn't yet but. In part because of what we've been doing in applying the lessons of the -- lessons of warfare to mix my abilities. Will be encouraged. By the activities of the activities were doing on the reform side actually hurts them so you know hiding place for shadow banking. No no and -- the objective is to turn that from our parlance from shadow banking to market based finance. And and one of 
 the themes of what I was trying to say. He is that. Good markets are transparent. They have robust infrastructure. They are structured in a way that is continuous of -- they aren't. Discrete. And unfortunately much of shadow banking doesn't meet those criteria and so we will move in that direction. Let me phrase -- question somewhat differently some politicians in this country have identified what they see as a trade off. Between. Greater stability. Racquets more capital. And growth that is more leverage 
 and you accept -- -- -- what do you think you've found a way the result. I I buy you I've been very fortunate in my time because -- my colleagues and Andrew and earlier here today representing them. They're very much part of these decisions. They recognized. Through the FCC. The Bank of England. That. The tradeoff is not there if if the core institutions or inadequately capitalized. And through a series of efforts. Most notably earlier this year where they got a lot of noise -- -- -- from maybe something. 
 Politicians here you're referring to comments about the capital talent. Well you you can refer to them tonight I can just leave it out there and they in the ether. But the core point was that. And less financial institutions are adequately capitalized. They don't go and -- new business they're looking over their shoulders they've become fundamentally receivers in part because investors are creditors and they themselves -- this. It's -- it is interesting that. And and I don't think this is a correlation that 
 this is just a correlation and causation that once the core of the system here. Reach this the FBC 7% threshold which is fairly demand threshold once it reached that solutions leverage that we started to see growth again. Credit. And do you believe that the this argument actually is being resolved by the numbers on the ground today said that Britain has turned the corner. And -- and -- -- I think I think and and Charlie mentioned this yesterday certainly agree one of the reasons to think -- could be 
 assists. Some. Sustainability some traction in the recovery. Is that the core of the financial system. Here hands caught a lot better I won't say it's fully healed but got a lot better and and and the rebuilding of capitalism big element but just a year ago I think there was -- -- the consensus -- that. The Financial Times. -- the financial system and the transmission mechanisms for credit. Essentially broke. Didn't -- that still fight -- it's -- it's it's substantially. Lester certainly don't not broken 
 it's gone it's not operating as well as it ultimately will. -- the national transmission mechanism that's why we still have funding -- -- and place. That's why in some respects what we still have exceptionally accommodative monetary policy that that healing process still has to. Proceed for a while but what has changed is that is the core of the system of course systems function or make one final point if I may. One of the things we shouldn't measure though for a sustainable recovery in the UK is an 
 aggregate growth in credit. This is still an economy that where there is large. And desirable -- leverage in of the economy's so we're not necessarily gonna get the aggregates. Growth growing what's important is that the new businesses. And and the young families are able to get access to credit. So it was not paying full throated endorsement for help tomorrow. That was boy I had to I didn't touch touch that there at all it was a full throated -- Gore's endorsement for a -- for lending. And for the FCC's 
 effort to fix the court and I'm just telling me that funding for -- really is actually making a difference. Much lines in some quarters again. I think the it makes a difference for those -- it makes a difference because it plus few other things. Have substantially improved -- overall funding markets -- Funding funding to come down 250 to 300 basis points at the core of the system funding rates it's held very much -- Europe but funny for -- played an important rule. I can't get a full throated endorsement. 
 The role of the city of London. But figures this week and the deputy governor Charlie being cited the relatively poor slightly worrying. Performance on export financial services from the city. Can you explain what's going on ways this is temporary phenomena. Well I there's there's two things have been one is that the overall level of of cross border capital flows and I I touched on briefly in the speech. Have have gone down. Substantially since since the crisis down more than 50% almost 60% on some 
 measures. That's pure cross border -- A lot of that's in Europe but there's more transatlantic and and developed emerging market. Some of that. In fact this sense of proportion that's actually desirable this is short term wholesale finance between banks in Europe we know how well that's worked -- It was structured products from the US back into Europe as well. Again that's not something is necessarily desirable that what -- shrunk down into though is that core of more sustainable flows. Which we would 
 expect to grow from there -- whether or not. UK institutions. Maintain market share increase mark -- up to them what we have to do was organize the system the way that is. Insurers that it's. -- in insurers domestic stability. We now -- we think we can do that comes before open questions. No conversation with the governor of the bank of England and the Financial Times would be complete without some reference to -- You studiously avoided any reference comes to the question of banking. Do you believe that if 
 banking industrial ahead. That -- the role of the city is secure that we will not be discriminated against by that deeper integration and you're. Well I think -- goes to international engagement goes -- engagement European level it's something that. All the governors are very focused on is one of the advantages of junk unless. Communion -- myself that you know -- the first I would phone -- made was to Mars drug. As governor the first media had was she took with us as India is the first meeting when my first 
 news with Michel Fournier. And vice chair of the yes sir the side of the General Counsel meetings we. And this is this is true my colleagues in there and in their settings as well and will be -- up and down me the chain in the bank of England and the way to make this work. Is is to be engaged and that means that we have to dual structure. Where we are -- we have the supervisor here we -- in the macro prudential regulator here. We make -- or you work we make the General Counsel these work would make the 
 commission's work in ways that. -- UK financial services but the only way to do that. Is is to be engaged. So no anti -- policy being pursued. Governor embankment. First question from the floor is kind of routine. Please do stand up. So mr. governor. My question -- you'll be surprised it's the regulation and growth. You noted too many of the reforms that have -- happened aren't being implemented but. Being very disciplined and we'll debate what the editor suggested in terms of being forward looking. So my 
 question would be what sense sex if any has the FBC put in place. Or would you recommend that the FBC put in place and that -- going to very important. Months ahead let all the details of the ICBM PC BS recommendations are going to be. You know find Andy and detailed. That would both get to a policy makers and I think all of us want which is a bus legislation. But that we don't can't -- say two things one is we don't disadvantaged UK PLC. And specifically are small and medium size companies that obviously 
 could be affected by these structural reforms. And second and very importantly that the invest ability of UK banks. Is is is again gold and vis a -- not only US and German banks but also thinking about the financial sector vis -- vis other sectors. As we go through these very important structural reform the tales that a friend their winters. And others have been working on. The I think a couple things one is. We will. And we have commented. On the as it is you know one. The PC BS. That -- the current set of 
 recommendations we're into the legislation and that's in the in the public domain. Obviously we we've the FTC but the broader bank the period itself. And the broader banker taking him. If -- clear focus on the financial aspects of micro and macro prudential. We have. Secondary objectives. Which -- to support strong sustainable balanced growth effectively and and in the cases of and we take those very seriously so it's it's prudence but in the context of I -- satisfied that. -- we supported and so this isn't 
 to use another phrase you're drifting towards this is about stability in the greater and it's of them. Appropriate levels. Resilience in the system now being resilient UK banking system. He's going to perform better mean ultimately investors who make those determinations but. Again if you look at. Since the much maligned. But correct in my opinion certainly. FEC effort. You know price to book gracious of UK banks have gone back to. Towards unity from heavy discounts. Things that make this system work. Make 
 it work better at the core. Or alternately. Gonna change the the sharper issue -- it was -- It's. Investing in the UK financial institutions but we're we're conscious of we're absolutely conscious it's a macro institutional definitely the Bank of England and we're very conscious of what's and getting that balance right. So that once we've achieved those appropriate levels of resilience. That. We -- it's not overdone. -- Think. And into roster. Mr. governor. If he has been through many financial crises and 
 survives today and remarkable way. I would just like to point out -- -- question. Five years ago when we financial crisis. I think it's fair to say that the general public. Lost confidence in the banking system. That confidence has been eroded. Its not that reiterated the United Kingdom and Europe and the United States. Can you and -- me on the basis that you think confidence is coming back. And do you believe that central banks generally well liked being more open. And more publicly -- Of the average 
 person who tries to open accounts and has confidence in the bank. Not any open access but it. Well I I think you're absolutely right there's been a loss of confidence and in banks of the loss of confidence in the system. And hired -- there's been. Loss of confidence between. Authorities in the system -- trust. Between authorities in the system. And and we've been going through a process of trying to build that back up. What what's necessary and and confidence you know. It it. It the Montag casino. Famous 
 version of this which it grows with. The -- of a coconut trees and and and to -- you know falls with the the speed of the coconut almond. What we've had the fall and that was going to be grown back up what and how we nurturing. Capital is part of it is that's that's obvious. I think capitalism is part of it actually. Making the system -- so ending too big to fail. He is is is a large element. There is in need I think compensation has been a big element. From the public perspective. We will -- I would. 
 Suggest that as important as some of the compensation the initial compensation reforms have been. So to get proper alignment of employee incentives for investing and claw backs -- As important as those have been. Compensation structures can ultimately you replaced culture. Within an organization and so institutions really need to get their culture right and that unit in the end their core values right. And that ultimately goes back to the end customer so. Understanding that. Without a prosperous. Real 
 economy prospers customers. The institution itself isn't going to prosper so they have to be speaking to these people and and hearing the messages. So I'll just open by just saying look we are I think central banks do recognize. Sued Bank of England recognizes this this fundamental hits to confidence and l.'s facilities personalize it. He used to really strike me when I would come to you okay. The -- lesser extent to the US from Canada as his government candidate. How different things were a different. 
 Confidence had been hit. And and I don't know if it was fear but it certainly loathing and replaced. Confidence in that regard and gives a sense of the scale of of the -- Next question. Christian -- Yes. This process from disintegrating from the TC in -- for much -- for the free access we -- into the home. And covenant and it's good to see. The bank taking counts of unemployment and it's assessment of the economy. But isn't counting numbers -- amounts -- work a bit prudent shouldn't we also be looking acts. 
 As the record number of part time work is seeking more rallies. And of course what's happening in terms of people's real pay and if it stands it's. And let me say this I mean certainly. In terms of our guidance. We take into account unemployment on the unemployment rate is the is you know. The threshold four in reconsideration. Of monetary policy whether or not we would we would adjust or overnight rate. We've tried to make very clear that we look at a much broader range of indicators both in terms of slack 
 in the labor market but. More broadly slack in the economy and when we get. When the economy gets to that staging. Post. 7%. We will look and we do even today look at. Other factors such is the first proportion of workers who -- working part time but wanna work full time which is. In the upper teens and used to be substantially lower we look at hours worked. And what we've seen. In over the course of last year is that. There has been they're actually has been a steady increase in the amount of hours worked 
 with people. We're working there receive it revealed preference. For people to work longer and unfortunately it. That may relate to. What's happening with wages. And the line which which pressures which are or are very low. At the moment it may also have to do with the shift of employment from the public to the private. Sectors that we look at those factors. And will also look at other factors in terms of a proportion of long term unemployed and and and whether or not those. Those workers can come back in 
 the markets that we do look. And we will continually look at a very broad range of labor market indicators to get a true indication. What the degree of slack -- in the labor market and as a consequence what what that means for. Activity and and and inflation and remembering in all of this that well we're using the unemployment. Rate as a threshold to then takes off. We are above and you know at the beginning at the end inflation partners and our job is ultimately about getting inflation back to the 2% 
 target. On the appropriate for us. Ladies and gentlemen I'm very sorry about being there is a very tight and table the way around. The governor is gonna get a press conference. Achievement and recognition -- -- -- request that. The -- -- a little bit more open. But I I would just Oscar everyone has come tonight I should thank you from the outset for coming. An extraordinary calories. -- Of people here tonight. To thank. The government. For giving us a really interest things lecture. His covenant enormous 
 amount of terrain. -- tendency battleground. And we're all extremely grateful concerning the Financial Times thank you to them