Andrew Bailey: Governance and the role of Boards Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at the Westminster Business Forum, London, 3 November 2015. *  *  *  It is a pleasure to be speaking at the Westminster Business Forum again. I am going to use my time this morning to set out some thoughts on how at the PRA we are thinking about the role of governance and Boards in the prudential supervision of deposit takers, insurers and major investment firms. We work very closely with Boards, more so than in past approaches to prudential regulation, and I find it a very important, constructive and informative engagement. There is a lot of focus at present on the Senior Managers and Certification Regime which will be implemented by next March, and on the proposal before Parliament to change one element of the test, namely the Presumption of Responsibility. This morning I am going to focus on the substance that underpins the regime. Also, I am not for the most part going to comment on the issue of diversity in Board membership, but not because I think it is unimportant, far from it.
But even if there is substantial disintermediation, it does not mean that banks will cease to be dominant players. My point is just that as euro securities markets develop and deepen, more of the finance banks arrange will be off balance sheet. I’m inclined to think also that we will see further consolidation within the European (and indeed global) banking sectors, though I think that will not primarily be a function of the euro, and is something I will touch on in a minute. Now, all these developments offer opportunities for financial services firms globally. This is not a zero sum game. I expect to see financial centres within the euro zone growing in size over the next few years. But London will grow too, and I think it is significant that many of these potential developments depend on market practices and techniques pioneered in London. BIS Review 43/1999  4  I see London as the engine for growth and innovation in the European capital markets. This is not a narrow parochial point. As I have already emphasised, UK financial services are highly internationalised and many of the UK–based beneficiaries of this process are owned elsewhere – in the US, Europe, Asia and elsewhere. Nor does it reflect complacency.