At one end of the spectrum are those who say that the crisis has meant that the dividing line between monetary policy and financial stability policy has in many ways been erased, or at least become less evident. If the central bank does not already have the clear and express task of maintaining financial stability, it should be given this – in addition to the natural task of acting as “lender of last resort” in a crisis. Monetary policy should be regarded as a legitimate tool in the financial stability toolbox.3 At the other end of the spectrum we find those who say that monetary policy and financial stability policy are distinct policies that should not be confused with one another. They claim that monetary policy and financial stability policy differ in the same way that monetary policy and fiscal policy differ, and they have different targets and methods. The policy rate should therefore not be regarded as an instrument for financial stability policy. Both types of policy should react to one another, but they should not be coordinated and conducted together as  1  The concept “balance sheet recession” was introduced a few years ago as an explanation for developments in Japan and its “lost decade”; see Koo, R.C., Balance Sheet Recession: Japan’s Struggle with Unchartered Economics and its Global Implications, Wiley, 2003.
These possibilities are why the Bank has already taken a number of steps to encourage FinTech’s development. 4  For a summary of the new regulatory arrangements see “Changes to the Bank of England”, Murphy, E. and Senior, S, Quarterly Bulletin Article (Q1 2013). 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  The PRA and the FCA have changed their authorisation processes to support new business models. The New Bank Start-Up Unit, created in 2016, works closely with firms seeking to become banks. Already, four new ‘mobile’ banks have been authorised. 5  The Bank also established a FinTech Accelerator last year. Since then, we have worked with a number of firms on proofs of concept ranging from strengthening our cyber security to using AI for regulatory data, and improving our understanding of distributed ledgers. Today we are opening our 4th round of applications to the Accelerator. We are looking to work on new proofs of concept on maintaining privacy in a distributed ledger and applying a range of big data tools to support the Bank’s analysis. 6  More broadly, the Bank is working to ensure that this time the right hard and soft infrastructure are in place to allow innovation to thrive while keeping the system safe. Let me expand briefly with three examples. The Right Soft Infrastructure First, with respect to soft infrastructure, the Bank is assessing how FinTech could change risks and opportunities along the financial services value chain.