The Financial “Plumbing” Committee: from Plumbing to Policy Elisabeth Stheeman External member of the Financial Policy Committee
The Financial Policy Committee Andrew Bailey Governor, Bank of England Sir Dave Ramsden Ben Broadbent Sir Jon Cunliffe Sam Woods Deputy Governor, Markets Deputy Governor, Deputy Governor, Financial Deputy Governor, Prudential & Banking Monetary Policy Stability Regulation, Chief Executive Officer of the PRA Alex Brazier Charles Roxburgh Christopher Woolard Executive Director, Financial HMT non‐voting member, Stability Strategy and Risk Interim Chief Executive Officer, Financial Policy Financial Conduct Authority Anil Kashyap Elisabeth Stheeman Jonathan Hall Dame Colette Bowe Don Kohn External member External member External member External member 2 External member
Figure 1: Aggregate capital of major UK banks CET1 capital ratio (per cent) 18 16 14 12 10 8 6 4 2 0 2007 8 9 10 11 12 13 14 15 16 17 18 19 2020 H1 Sources: PRA regulatory returns, published accounts, Bank analysis and calculations.
Operational risk and resilience “ Operational risk is the risk of disruption from systems and processes, from human errors and management failures and from external events and external actors.” “ Operational resilience on the other hand, is the ability of firms and the system as a whole to prevent, respond to, recover and learn from operational disruptions.”
Figure 2: Impact of operational resilience on the objectives of the authorities Figure 2 illustrates the objectives which are most likely to be affected by operational resilience issues. It also illustrates that the consumer protection objective is likely to be affected more often, and by more firms, than the market integrity, the safety and soundness, and financial stability objectives Sources: Bank of England DP01/18
Figure 3: Sources of risk to the financial system Per cent mentioned by respondents 100 80 60 40 20 0 2008 2009 H2 2010 H2 2011 H2 2012 H2 2013 H2 2014 H2 2015 H2 2016 H2 2017 H2 2018 H2 2019 H2 UK political risk Cyber attack Geopolitical risk Risk of an overseas/global economic downturn Risk of financial market disruption/dislocation Sources: Bank of England Systemic Risk Surveys and Bank calculations
Figure 4: Payment volumes (millions) 2008 to 2019 Sources: UK Finance
Figure 5: Proportion of total payments made in cash 60% 50% 40% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Sources: UK Finance, Riksbank
Figure 6: Overview of a payments chain and the limits of current regulation Source: December 2019 Financial Stability Report
Questions? Elisabeth Stheeman External member of the Financial Policy Committee
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