A major challenge ahead is the consistent and timely implementation of the Basel III framework. It is of the essence that we all adhere to the agreed timeline, ensuring that our banks have a strong capital base. Only when implemented in a consistent manner across jurisdictions will the expected significant net social benefits, including reduced volatility of credit and GDP growth as well as the lower probability of occurrence of systemic crises, be achieved. To reap the benefits of the new framework, a consistent implementation of Basel III is essential. In this context, I welcome the European Commission’s proposal on the implementation of Basel III in the EU, issued in July in the form of a fully-fledged capital requirements regulation. With this step, the EU has demonstrated its strong commitment to the rapid implementation of the Basel III agreement. As it was already said earlier in this Eurofi colloquium, great attention is presently given to this very important piece of legislation, to verify and make sure that it is fully in line with the agreements reached at global level through the Basel Committee, the FSB and the G20. I am confident that this work will be satisfactorily concluded. SIFIS Another important step taken to strengthen the resilience of the financial markets is the agreement reached on global systemically important financial institutions. A key lesson from the crisis is that incentives need to be put in place for banks to reduce their “systemic footprint”.
The FSA has also been able to lower micro prudential liquidity requirements because of the extra liquidity backstop being provided by the Bank of England – in particular the ECTR and the Funding for Lending Scheme. This example may be important in a wider sense. One of the challenges facing macroprudential policy is that the instruments may not be symmetric in their impact. Put crudely, we can make firms hold more capital and liquidity when the going is good. We can’t force them to use those buffers when the going is bad, even if the rules are relaxed. Taking away the stick isn’t the same as offering a carrot. Vegetable metaphors are not always welcomed but I think it’s acceptable to suggest that the FLS may be seen as a carrot! And the FPC recommendations are perhaps a first example of macro prudential policy being used in a co-ordinated way (with central bank actions) to support the resilience of the UK financial system, by being counter-cyclical in approach. This ability to co-ordinate may also demonstrate the benefits of some shared membership across the FPC and MPC. 6  BIS central bankers’ speeches  I want to turn now to the Funding for Lending Scheme in the context of our announcements this morning of the first banks and building societies to have signed up and their stock of sterling lending to UK firms and households at end-June 2012 (Table 1) that will be used as a reference point.