Sam Woods: Brave new world Speech by Mr Sam Woods, Deputy Governor for Prudential Regulation of the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), at the Association of British Insurers, 16 March 2021. * * * Thank you for the invitation to speak today, and for coming along to this session. Although I can see nobody on my screen the ABI assures me that an implausibly large number of leaders of the insurance industry are in fact present, and that some of you may even be listening to this speech. As a prudential regulator we oversee a large and vibrant insurance sector supplying vital financial services to the wider economy. I will not bore you with another list of the magnificent variety, size and importance of those services – that is the job of the ABI. But safeguarding the stability of their supply is the whole point of our role. That role is about to change in two ways. First, the Solvency II review is well under way – I will come back to that. But I want to begin with the second change, which is more fundamental – the proposed reforms to the architecture of financial regulation as we enter the brave new world of post-Brexit Britain – and explain why we favour a shift towards more rule-making by the regulator, and the enhanced accountability that needs to come with that.
As a regular attendee of TSC hearings I can assure you that we are already held very robustly to account for our activities – but I can see the point that some in Parliament have been making that if we do more rule-making, and with European Parliamentary scrutiny of rule-making no longer present, then we might be expected to do more to support Parliament in probing technical regulatory issues. Whatever Parliament decides on this, we look forward to engaging fully. International standards are another important safeguard. The UK has always been at the forefront of their development: with the Federal Reserve, the Bank of England was the driving force behind establishment of the Basel Committee on Banking Supervision and supplied its first chair. We remain fully committed to the development and implementation of international standards, and this applies as much in insurance as it does in banking. Actions speak louder than words – Dr Vicky Saporta, who runs prudential policy for the PRA, is also a very energetic and successful Chair of the International Association of Insurance Supervisors. There is also an increasingly lively debate around our objectives and ‘have regards’. As with accountability arrangements, it may well be sensible for these to evolve as our role changes. And we need to be wary of the natural tendency of regulators to become strongly attached to the objectives Parliament has currently set for them. But I would offer two notes of caution.