Indeed, you might think of our task as a classic budgeting problem. In our case, we have a bundle of rules which deliver a certain level of resilience at a certain cost. What we are asking is whether a simpler bundle could deliver the same level of resilience for small firms at lower cost. The simpler regime will also need to be assessed against the Basel core principles for effective banking supervision.9 These are different to the Basel standards which apply to internationally active banks. The principles are an international benchmark for measuring the quality of supervision of all banks. We will design the simpler regime to be consistent with them. Before moving on to talk about what the simpler regime might look like, I need to address the fact that reducing small firms’ compliance costs from complexity might introduce another sort of problem if it erects new barriers to growth. The problem is that, whilst the costs of complying with a simpler regime will be lower for small firms, some small firms want to grow.
2  ‘Strong and Simple’, speech given by Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority (12 November 2020). 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  Scope, strength, simplicity Let me now highlight some of those choices about which I am especially keen to receive comments. I will do so by elaborating on three key terms. First, what do we mean by ‘non-systemic banks and building societies’? In other words, which firms should be eligible for the simpler requirements? Second, what do we mean by ‘strong’? And finally, what will ‘simple’ look like? To begin with scope: as Sam explained in November, a strong and simple framework could in time include graduated requirements for all firms not subject to the full set of Basel requirements for internationally active banks. That would be a major undertaking, so this Discussion Paper set out options for a first step, which would apply to the smallest banks and building societies. This is what I will refer to in this speech as a ‘simpler regime’. The Discussion Paper suggests that the firms eligible for the simpler regime could be identified using a size criterion (probably total assets) – but not what that size should be. It also suggests that other criteria might be applied to ensure that only firms with relatively simple operations are included. For example, we might only include firms without a trading book.