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Reforming Financial Markets

I take the view that I have held consistently for the past 10 years. It was right to give the Bank independence to deal with monetary policy. That will stay; I do not think that anyone wants to reopen that decision. It is right, because of its responsibilities, that it should have a view on financial stability. When it comes to the whole question of macro-prudential supervision, if one were to give more powers, the Bank would be the obvious place to go. I honestly do not see the advantages of saying that the Bank should also start to involve itself with the hundreds of different banks, building societies, insurance companies and other financial institutions, because all that that would do is simply move a large chunk of the Financial Services Authority into the Bank, and I do not think that that institutional change would benefit people at present. I would rather build on what we have, and identify the problems that we have. I repeat a point that cannot be made often enough: institutions are important, and so are the tools to do the job, but at the end of the day, we are talking about a matter of judgment. Frankly, yes, the FSA got things wrong with Northern Rock, and the Bank of England, in the '80s and '90s, made mistakes of judgment. We have to concentrate on trying to make sure not only that we have the institutions and the tools, but that people understand what they are doing.