The ideal post-EU regulatory framework Speech given by Victoria Saporta, Executive Director of Prudential Policy  International Business & Diplomatic Exchange 2020 Annual Conference, London 10 March 2020  I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 1  A lot has changed since the last global financial crisis. Banks are much more resilient. The PRA has authorised 18 new banks in the past five years, with further banks in the pipeline to be authorised. The role of non-banks and market-based finance has been growing. And digitalisation is transforming a number of financial services. In spite of these changes, the fundamental market failures that justify the need for prudential regulation remain. This is because financial firms can take actions that create “negative externalities” – jargon for someone making bets that hurt innocent bystanders when they go wrong. And in the case of “systemic” negative externalities they hurt the economy at large, as the Great Financial Crisis reminded us. Equally, these market failures need to be dealt with in a manner that does not introduce frictions that hurt innovation and long-term productivity and economic growth. Prudential regulation that deals effectively with these market failures has to be underpinned by an appropriate institutional structure: a set of clear responsibilities enshrined in law on who sets the objective for prudential regulation and how, who regulates, and where the details of prudential regulation should sit.
Remote communication has not yet displaced human contact completely as the medium for doing business; indeed, face-to-face contact has survived much more extensively than some had predicted; and, to the extent that it is necessary or desirable to get people round a table in order to expedite some project, Hong Kong, because it is small, is one of the easiest places in which to do so. •  A third factor supporting the "can do" culture is the general quality and spread of people who are on tap to help get things done: Hong Kong has a good critical mass of expertise in all areas of financial and related services. Of course, I am not deaf to the difficulties sometimes expressed about finding extra people at a particular time with particular skills, but this is almost inevitable in a growing economy. Even then, some relief is normally available through drawing in temporary resources from outside Hong Kong if the occasion demands. •  Finally I would cite the work ethic. People work for long hours and with much loyalty in Hong Kong. Of course, this is not enough in itself. It is productivity that counts, but that is probably where Hong Kong scores; I don't have the impression that many people are passing the day gazing idly out of the window. The corollary of high productivity is that, as I noted earlier, by international comparison a lot of people here receive high salaries, but they certainly earn them. Otherwise they would not hold onto their jobs.