BIS central bankers’ speeches  1  So if the narrowness of my scope disappoints, I would invite you sit back. Literally. Admire the Sheldonian’s ceiling. Marvel at how Wren’s original design bridged such an expanse with neither beams that could individually span its width nor floor-to-ceiling columns that could support it. Reflect on the allegory in the paintings that shows Truth descending upon the Arts and Sciences, expelling ignorance from the University. While you do, I will attempt my more meagre exam question. The Bank’s very great – yet rightly circumscribed – responsibilities are formalised in the remits of the three major policy-making bodies of the Bank – the Monetary Policy Committee (MPC), the Financial Policy Committee (FPC), and the Prudential Regulation Authority (PRA). The MPC’s remit requires it to achieve price stability, formalised as 2% CPI inflation, and subject to that to support the Government’s economic policy including its objectives for growth and employment. The FPC works to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system as a whole, and is subject to the same secondary objective as the MPC. And finally, the Bank of England’s PRA is required to promote the safety and soundness of individual firms; to contribute to securing an appropriate degree of protection for insurance policyholders; and, subject to that, to facilitate effective competition.
Greatly increased financial openness, in part associated with EU membership, has made the UK financial system larger, more complex and more exposed to shocks from abroad. These developments reinforced domestically generated vulnerabilities in the run up to the Global Financial Crisis. The UK, along with many of its main international partners, lacked the institutions and tools for managing and addressing them when they crystallised. As a result, when the crisis hit, global shocks were transmitted virulently across borders, doing great damage to the financial systems and real economies of many countries. The UK was particularly affected given its high degree of financial openness. Most recently, challenges arising from European Monetary Union (EMU) have been particularly evident. Our ties are close. 40% of our exports go to the euro area, and major UK-owned banks have financial exposures to the euro area totalling almost twice their capital, worth a quarter of UK GDP. These figures underscore the importance to the UK of further building the resilience of the euro area as part of a strengthened European Union.9 In this regard, the progress made in recent years is particularly welcome. Nonetheless, as highlighted in the European Commission’s “Five Presidents’ Report”, the euro area remains “unfinished business.”10 Actions to complete European Monetary Union should be taken with regard to their impact on all members of the European Union. From the Bank of England’s perspective, steps to ensure financial stability for those within the euro area should not impede the achievement of financial stability for those without, including the United Kingdom.