Paul Tucker: Macroprudential policy – building financial stability institutions Remarks by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, at the 20th Annual Hyman P Minsky Conference, New York, 14 April 2011. *  *  *  These remarks do not necessarily represent the views of the Bank of England or the interim Financial Policy Committee. I am grateful for comments from Charles Bean, Alastair Clark, Roger Clews, Spencer Dale, Paul Fisher, Andy Haldane, Don Kohn and Hector Sants. Thank you very much for inviting me to join you this evening. Having spent much of my career thinking about or living through the issues studied by Hyman Minsky, it is a very great honour to be here. I am going to begin with the birth of the Federal Reserve. And then I am going to discuss the birth, a century later, of a new institutional framework for financial stability in the UK. It is almost a hundred years since the Federal Reserve was established, after successive waves of bank runs. Against the instincts and interests of the followers of President Andrew Jackson, America finally found itself with a central bank. Its purpose, cast in 1913, was “to furnish an elastic currency, to afford a means of rediscounting commercial paper, [and] to establish a more effective supervision of banking in the United States”.
Five of us are drawn from the executive of the Bank, increasing to six when microprudential supervision of banks and insurers moves across in  5  Hyun Shin has set this out with great clarity. 6  See Tucker, Comments at Clare College, discussion of Lord Turner’s Lecture, “Reforming finance: are we being radical enough?”, Cambridge, February 2011. BIS central bankers’ speeches  5  2012/13. The two senior officials of the UK’s existing regulator, the Financial Services Authority, are members during the interim period. And once the legislation has passed, the chief executive of the planned new securities/consumer regulator, the Financial Conduct Authority, will be a member, reflecting, as I have outlined, the vital role of market regulation in preserving stability. There are four external members, including from the USA Don Kohn, the former Vice Chairman of the Federal Reserve Board. The Government expects the legislative process to be complete towards the end of 2012. In the meantime, during the interim, non-statutory phase of our existence, the Financial Policy Committee has two broad functions: “paving” and “shadowing”. We will pave the way for the statutory incarnation of the Committee by advising the government on the instruments and powers we could be given by Parliament. And, secondly, we will as far as possible shadow the role of the statutory FPC, which essentially means advising the FSA on where and how it should use its regulatory tools for system-wide ends. So what are those ends? They are consistent with my earlier overview of financial stability.