And this supply of services is a necessary condition for a healthy and  BIS central bankers’ speeches  1  successful economy, as demonstrated by the costs imposed by the financial crisis on the public and society at large. For insurance companies, the PRA will have the second objective of contributing to securing an appropriate degree of protection for those policyholders. Why do we need a second objective for insurance? For me, it rightly emphasises that in taking out some forms of insurance policies, the public can become locked into very long-term contracts, much longer often than is the case in banking with deposit contracts. Bearing this in mind, the public interest I think justifies a second objective for insurance, which is more directly targeted at the situation of individual policyholders. In contrast as bank deposits are redeemable on demand at par value, and as banks lend the deposits at longer maturities, so they are inherently fragile and vulnerable to contagion, so protecting the system protects depositors. There are a number of important points in this description of the PRA’s objectives. First, the emphasis on economic well-being as an ultimate goal aligns the supervision of banks and insurers more closely to the field of macroeconomic policy. This is in line with the definition of “financial stability” as the continuity of supply of critical financial services which are important to the functioning of the economy. Three services stand out here: the provision of payment services including access to funds; credit extension; and, risk transfer.
We will get a much clearer focus from splitting prudential and conduct regulation for banks and insurers, from introducing macro-prudential regulation to help to protect the financial system as a whole, and from  4  BIS central bankers’ speeches  focusing our regulation on applying judgement in a transparent way. Firms that mess up should, and will, be allowed to fail, but it must not be at the cost of damaging the financial system and economy. Ringfencing commercial and investment banking will help to achieve that objective. And, out of these reforms I hope we can encourage a banking system that is more open to competition and serves the public more effectively and, more broadly, a financial system that delivers the public policy objective of financial stability. Thank you. BIS central bankers’ speeches  5