I’m going today to set out what new instruments we have in that little metal tray next to the “prudentist’s” chair, and what we plan to do with them, so that you can prepare yourselves. View from the chair The good news is that, despite the impact of Covid, our patients are generally alive and well. Looking across the banking and insurance sectors as a whole, capital and liquidity positions are strong and operational resilience has largely held up to Covid and cyber pressures. This is the result of the efforts that have been made by many people in financial services to get the industry onto a stronger footing following the 2008 crisis, as well as the fiscal, monetary and regulatory support provided in response to Covid by the authorities. This means that we have the luxury of sitting in the dentist’s chair, and not in the hospital. A number of things seem much more visible than last time we were here: on the back of the door, a charter of regulatory freedoms to try new approaches following our exit from the EU; on the wall in front of the chair, new ideas on diversity and inclusion; and on the ceiling hanging over it all, the storm clouds of climate change. Plus of course Solvency II, which is resistant to being included in any form of analogy.
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.