Sam Woods: Prudentist Speech by Mr Sam Woods, Deputy Governor for Prudential Regulation of the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), at the Mansion House, London, 22 September 2021. * * * I sometimes feel that regulators are a bit like dentists: they are necessary but no one, apart from a few masochists, really enjoys a trip to see them! One of the more surprising things about the last year has been, despite Covid infecting our patients, the extent to which we’ve had to rebuild our toolbox for reasons entirely unrelated to Covid. Some of you may complain that this is because fertile minds within the PRA are always dreaming up unpleasant new types of regulatory drills and toothbrushes, and that we should just stick with the old ones. Others of you may have seen the 1970s movie Marathon Man, in which the hero (played by Dustin Hoffman) is tortured by an evil dentist who keeps asking him: “Is it safe?” Given the PRA’s objective of safety and soundness, and in the spirit of post-Brexit de-regulation, perhaps we could actually just scrap all the rules and adopt this approach with CEOs instead, in the form of an annual visit to the prudential dentist. It might actually be rather effective. But honestly, I think we are just keeping pace with the world around us.
I refer of course to the review of Solvency II, led by the Treasury with close involvement from us. This is a great example of an area where we can tailor a regime designed for 28 countries to work much better for the one we inhabit, cutting bureaucracy and supporting competitiveness while maintaining high standards. I am grateful to actuarial teams and other colleagues in firms who have been hard at work preparing quantitative and qualitative submissions which should allow us to understand the potential impact of any changes. It is important that this work moves forward at a good pace, but it is also important that we get it right – no one will thank us if we accidentally drill a hole in a perfectly sound tooth, or put a cap on the wrong one. Some of those in the debate whose job it is to promote the interests of shareholders favour a straightforward weakening of the regime. We, with a statutory objective to protect policyholders, are cautious on weakening. This difference of perspectives is of course entirely unsurprising and a natural part of the reform process. For our part though we have reached no firm views on any proposals at this point, because even before consulting we will need to be informed by the data which will shortly come back in from firms.