16 Carney (2014), Inclusive capitalism: creating a sense of the systemic. 17 They have also, over the centuries, been beset by poor behaviour, as shown by the FMSB’s comprehensive review of misconduct over the past two centuries. The history of financial fraud has rhymed all too frequently. See FMSB Annual Report (2017). 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  Repeated episodes of misconduct – such as the Libor and FX scandals – called into question the social licence that markets need to innovate and grow.18 Rather than being professional and open, markets became informal and clubby. Rather than competing on merit, participants colluded online. Rather than everyone taking responsibility for their actions, few were held to account. The crisis reminded us that real markets don’t just happen; they depend on the quality of market infrastructure for their effectiveness, resilience and fairness. Robust market infrastructure is a public good in constant danger of under-provision, not least because the best markets innovate continually. This risk can only be overcome if all market actors, public and private, recognise their responsibilities for the system as a whole. III. TRUE FINANCE So this time is no different. Markets don’t always clear. And we can suffer from their amorality. What to do with such knowledge? And how to retain it? To resist the siren calls of the three lies of finance, policymakers and market participants must bind themselves to the mast.
Third, the Bank takes a countercyclical approach. The UK deploys a Counter Cyclical Capital Buffer (CCyB) through which capital is accrued in the good times for release in the bad. Two years ago, amid heightened uncertainty following the Referendum, we cut the CCyB by £ billion, releasing £ billion of additional lending capacity. As the immediate uncertainty receded, we then required banks to rebuild it. Today their capital buffers are twice as high, meaning the FPC could unlock over £ billion of lending capacity, if required. Fourth, the FPC has identified the major cross-border risks to financial services that could arise in a cliffedge Brexit. 13  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  13  The biggest risks relate to contract continuity. 16 million insurance policyholders in the UK and 38 million in the EEA have policies that firms might lose the permission to perform in a no deal scenario. Around £ trillion of cross-border derivative contracts could be disrupted by the loss of the regulatory permissions required to service them and loss of recognitions for CCPs. The Bank has been working with the relevant parties over the past two years to ensure they have contingency plans for the worst case scenario. In some cases, particularly in insurance, UK financial companies are restructuring so they can continue to serve their EU customers. If all current plans are delivered successfully, the number of EU policyholders at risk will fall to 9 million.