In this context senior management means only the very senior executives, and in the PRA’s proposals, only non-executives that are either: the chair; chair of a major board committees; or the senior independent director. There are differences between prudential and conduct in this respect, and our consultation poses the question of how substantial those differences should be. But, is it really unreasonable to expect the most senior figures to assume responsibility? Not in my view, and in my experience not in the view of those who take on these roles. Boards should challenge and this is the role of the NEDS. The executive should view this as a positive help to improving judgements the board is called upon to make and so should provide NEDs with the material to do that, and to do so as concisely as possible. The old saying for students that it is harder to write a good short essay than a long one is relevant here. And, as supervisors we too should follow that principle. In conclusion, whilst more capital and liquidity was a necessary condition for fixing the financial system, it wasn’t sufficient. Getting the incentives and governance right matters a lot. As supervisors our job requires good judgement – not easy but it has to be done – and it also requires a keen eye for structuring incentives to deliver our objectives. Rules alone will not get us there.
While this story I’m telling about the move to digital payments has been UK-focused – the trend is global. Many emerging market and developing countries have also seen a sharp rise in digital and in particular mobile payments. Some types of international payments – importantly including remittances – remain expensive and cumbersome. As domestic payments are evolving, the importance of international payments is rising. Cross-border e-commerce has risen. And remittances inflows have increased by 64% in the last decade to overtake foreign direct investment as the largest source of external financing for low and middle income countries. 2 But cross-border payments are often more expensive, slower, less transparent and harder to access than domestic ones. The average cost of remittances, for example, stood at around 7% in 2019, well above the UN sustainable development goal of 3% by 2030. 3 And the same frictions exist in other types of wholesale and retail cross-border payments. Work is underway at the international level to tackle these frictions. Enhancing cross-border payments is a G20 priority for 2020. The international Committee on Payments and Market Infrastructure has a task force looking at possible solutions. But there is no magic bullet. This will require international coordination on several fronts: with solution elements ranging from harmonised processes (AML checks), agreed targets, improvements to existing infrastructures (aligning opening hours) and even new infrastructures (for example to interlink domestic systems).