These are a review of the Bank’s approach to setting MREL4 and a review of the UK’s leverage ratio framework.5 Both are relevant to mid-tier banks and building societies which might not be eligible for the simpler regime. 3 Zahid Amadxarif, James Brookes, Nicola Garbarino, Rajan Patel and Eryk Walczak (2019), ‘The language of rules: textual complexity in banking reforms’, Bank of England Staff Working Paper No. 834. Quantification of rules and technical standards refers to number of words. 4 See Bank of England Discussion Paper ‘The Bank of England’s review of its approach to setting a minimum requirement for own funds and eligible liabilities (MREL)’, December 2020. 5 See Bank of England Financial Stability Report, December 2019 and HM Treasury/Bank of England/PRA/Financial Conduct Authority, ‘Regulatory Initiatives Grid’, September 2020. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  Returning now to the simpler regime and moving on to my second term, ‘strong’. Here I want to repeat Sam’s very clear message that we have absolutely no appetite to weaken standards. What that means is that we do not think that we have made any part of the banking system too safe. Nor do we think that a simpler regime should lead to any change in the level of resilience of the firms we supervise. What we aim at is a simpler regime which delivers the same level of resilience for small firms in a more efficient way. Which brings me to ‘simple’.
In this respect, it is also pertinent to understand that Exter made his recommendations at a time when the whole world had embraced Keynesian type of deficit financing as the sole remedy for unemployment problem and central banking with power to lend to the government or the economy was the rule of the day. Hence, as he had explained in the Exter Report, he had to adopt a pragmatic approach for the issue. He, nevertheless, proposed checks, balances and limitations for the central bank’s credit operations with the government or with the economy. The following are the provisions and limitations he proposed. 1. Provisions have been made in the Monetary Law Act for the Central Bank to grant provisional advances to the government to facilitate the latter to meet any liquidity shortages in its cash flow. Exter has been criticized for making this provision in the Act, because it amounts to printing new money and making it available to the government to finance its operations. Such provisional advances create reserve money and work opposite to the price stability objective of the Bank. Any neutralization of the adverse effect of such advances has to be done by the Bank through its open market operations. But Exter did not propose to offer an open cheque to the government and limited such advances to 10 percent of the estimated government revenue at any time and made them repayable within a period of six months.