Alignment with international standards supports competitiveness because it makes it easier for international firms to conduct business in the UK. It avoids inefficiencies that would arise from international firms having to comply with a different set of rules when they operate here. It also helps protect the UK’s financial system from the risks that originate outside of this country. Such risks will inevitably arise when a country’s financial system is large and open. To use my earlier analogy as our immune system needs to protect us from infection from elsewhere, and to stop us transmitting infections to others, we need global prudential defences to keep us all healthy. Dare I also say that financial services centres are more competitive when their regulators have a good reputation amongst their peers – for independence, strength, and effectiveness built on technical competence and understanding of financial markets. Some of my audience may be surprised that there is a concept such as regulatory innovation! But there is such a thing and UK regulators have a good reputation for it, recognised for example by the IMF in its recent Financial Sector Assessment of the UK. [14] Protecting and enhancing regulators’ reputation benefits global firms operating in the UK and UK firms operating overseas, not least through UK influence in global standard-setting bodies. For one thing, it makes it more likely that other regulators will allow firms in their jurisdictions to operate in the UK in a way that maintains deep interconnections with its financial system.
That is why, for example, we have clarified expectations about how firms should manage risks from cryptoassets and why, with the FCA, we set up and chaired the Artificial Intelligence Public-Private Forum to help us better understand the impact of artificial intelligence and machine learning on financial services. [3] It is also why we published this July, with the FCA and Bank as Financial Markets Infrastructure regulator, a discussion paper on critical third parties proposing proportionate measures to strengthen their resilience in a manner that supports the openness of the UK as a financial centre. [4] Good prudential regulation also changes to meet new sorts of risk, which is why we were amongst the first regulators globally to develop standards for operational resilience. [5] It turns out that white blood cells that target immune responses at threats, and direct them away from our own bodies, are called ‘regulatory T cells’, although I doubt they were named after prudential regulators! But they do what we need to do when we choose to take action. We need to boost the health of the markets we oversee, by letting our ‘regulatory T-cells’ target the threats we face in a tailored manner, leaving the healthy parts undisturbed. This is why, for example, we are  Page 4  building what we call a Strong and Simple framework for small domestic banks and building societies for whom Basel standards were not designed.