The bears may have seen their bargain flat pack furniture in a different light when they discovered how easily the chairs were broken by a little girl. Similarly, financial services supplied by undercapitalized firms are poor value as they cannot be relied on. And if policyholders cannot reliably distinguish the sound firms from the others, the whole sector is tainted – to the cost of us all as economic activity that relies on being able to lay off unsupportable risks is depressed. On the other hand, if prices are unnecessarily high that can also reduce or prevent risk transfer, and this can have a knock-on effect on economic activity and long-term investment. There is a balance to be struck. As I said in my opening remarks, I do not believe that we have that balance badly wrong at the moment. I hope that I have convinced you that, like Goldilocks in the more familiar version of the story, regulators do want to get it just right: we aren’t continually hankering after the largest chair, the softest bed, or the hottest porridge. And we are as open to evidence about what constitutes ‘just right’ as we are to how best to correct the distortions introduced by the current design and calibration of specific measures in the regime.
Goldilocks and the three pillars: how much capital is just right? - speech by Anna Sweeney i  Speech given at the Westminster Business Forum  Goldilocks and the three pillars: how much capital is just right? ‐ speech by Anna Sweeney | Bank of England  Page 1  Published on 10 February 2021  Overview Anna Sweeney says regulators must strike the right balance when they decide how much capital insurers need to hold. The three pillars she refers to are the different ways we regulate insurers. They are: the capital an insurer holds its risk management policies its disclosure of risks  Speech We are all familiar with the story of Goldilocks and the three bears. When preparing this speech I was surprised, and a little disturbed, to discover that in the first recorded version of the story, it is not a pretty young girl who enters the forest home of three bears, but a badly-behaved old woman, an outcast from her family. After wreaking havoc in the bears’ house she jumps out of the window, and is never seen again. (Let’s hope that the bears had good contents insurance.) In this earlier telling of the story, the visitor to the bears’ house is a caricature, and not a sympathetic one: I really don’t want to repeat some of the adjectives applied to her.