This is the immediate task ahead because we need to do all we can to clear up uncertainty here. Before going on, let me deal with two points that are related to this argument. First, it is said that this stance on capital is unnecessary because banks have stronger capital positions now than they did in the height of the crisis. This statement on the capital position now relative to the past is true but on its own that part does not tell us whether they have enough capital now. UK banks have made substantial progress over the last four years in building their resilience, but from a low base, it has to be said. There is further to go, but we should not forget the distance that has been travelled. The second point I want to deal with here concerns forbearance, namely the extension by banks of a variance in the terms of loans, which involves forgiveness of various forms. It is easy to imply that forgiveness is a bad thing, turning Japanese in the unfortunate sense of that term. Rather, we should deal with the consequences of forgiveness, not prevent it. The reason for that is because forgiveness has a very good side to it, namely that fewer jobs are lost and fewer homes re-possessed where it takes place. And we can see evidence of both of these in the latest recession relative to previous ones.
These two objectives contain the same “subject to that” language used in 1997 in the Monetary Policy Committee’s objectives. It means that there is a hierarchy of objectives which the FPC must observe. But, two further points are relevant here. First, resilience and economic growth interact, so they are not fully independent. An economy that displays stable growth is more likely to have a stable financial system, and vice versa. Second, policy is necessarily forward-looking, in that we are concerned with stability and growth in the future, since today’s outcomes are so to speak, “baked in”. This means that, in thinking about the hierarchy of objectives, in my view we have to take a forward-looking assessment of the probability of success, rather than saying we should complete one and then do the other. Financial stability is more complicated than monetary policy in at least one respect, namely that it does not reduce to a single target expressed as a number. Rather, it comes in the form of recommendations, in the plural, expressed as words. You would think that as central bankers and public officials we should love that, spending our time crafting language in a form that only we really understand. Let’s not get carried away here – there is a danger that  BIS central bankers’ speeches  1  by doing so we create uncertainty about our intentions. This danger of creating uncertainty exists because we are finding our way in a new and difficult area of policy.