Rather, it may be dangerously procyclical. So in the immediate aftermath of the referendum, we invited – indeed encouraged – firms to apply for transitional measures to smooth the impact of the risk margin during a time of market turbulence, and I also very much welcome the European Commission’s request for EIOPA to review the risk margin’s role more broadly. Take the leverage ratio as another post-referendum example of steps we are taking to put a smoother finish on the reforms. The framework was originally introduced to mitigate the risk to financial stability of excessive leverage. In August we decided to exclude central bank reserves from the exposure measure. They do not expose a firm to additional risks: as the ultimate settlement asset, central bank reserves are a unique asset class. Leaving reserves in scope would have obstructed the effective implementation of monetary policy. But neither did we want to take them out only to see a reduction in the nominal amount of capital required to meet the UK leverage ratio standard. So in making the change, we made clear that we will recalibrate the standard to offset this impact. The policy intent of our framework is preserved, while the unintended consequence is addressed. In a similar vein, let me say a quick word on the reforms currently being discussed in Basel – specifically the review of the use of firms’ own internal models for calculating risk-weighted assets and therefore their capital  7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  requirements.
By remaining true to the revolution – while not wasting our time and energy in refighting it – we can all turn our attention to the challenges of the future. In this way we will reinforce the stability of the financial system, for the good of the people of the United Kingdom. The revolution is over. Long live the revolution! 6  Have big banks gotten safer? By Natasha Sarin and Lawrence H. Summers, September 2016, available here: https://www.brookings.edu/bpea-articles/have-big-banks-gotten-safer/ 9  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  9