As other countries have found, the scale and scope created by a Development Bank is necessary to reach SME start-ups and scale-ups across all sectors and all regions. The best time to have put in place a UK Development Bank would have been 1929. The second best time is now. Until recently one of the great financial puzzles was that, despite waves of innovation, there was little evidence of its effects in measures of the efficiency of financial intermediation. At the macro level, the work of Thomas Phillippon suggests measures of banking efficiency in the UK and US have flat-lined.27 At the micro level, this lack of progress was well captured by the late, great Paul Volcker in 2009 when we suggested the only useful piece of financial innovation over the preceding 20 years had been the ATM. 26 27  Stamp (1931). Phillippon (2015). 16  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  16  Today, the winds of technological change are blowing a gale through finance, led by payments. New technological barbarians are appearing at the gates, transferring monies cheaper, faster and easier than ever. Many private sector initiatives are underway currently to develop so-called “stablecoins” – digital currencies backed by pools of safe assets.
But, for me, the case for independence is at least as strong as for monetary policy.23 If anything, decisions on withdrawing the punchbowl are harder, and even more important, during raucous credit parties. Thirty years on, the transformation in the policy-making structures and technologies for financial stability are every bit as great as those for monetary policy. An entirely new system of macro-prudential regulation is now in place, fusing together the micro and macro, the economic and the financial. Through the FPC and PRC, the Bank’s brain and hands are now synchronous. Beer and wine now mix just fine and the jumper-with-tweed-jacket combination is the height of policymaking fashion. In 2012, the Queen and Prince Philip visited the Bank. My colleague Sujit Kapadia used the opportunity to answer the Queen’s question soon after the crisis – “Why hadn’t anyone seen it coming?” Sujit set out the reform steps taken to avoid a repetition. The Royal couple took, I hope, a degree of reassurance. On the way out, the late Prince Philip turned and said: “Oh, just one last thing – don’t do it again”. I think the institutional framework now in place gives us a realistic hope of making good on his request. More than a decade on from the crisis, the financial system is a fundamentally different animal - leverage far lower, liquidity far higher.24 The UK’s largest banks’ activities are protected, additionally, by a ring-fence and systemic surcharges.