Of course one way firms can get larger is through mergers and acquisitions, for which PRA approval of the ‘change in control’ is required. A natural question to ask is how our secondary competition objective plays into these situations. The law is actually very clear on this point: when considering whether to approve the change in control, we are required to disregard the competitive impact and to limit ourselves to a consideration of the appropriateness of the new controller. Assessing the impact on competition falls instead to the CMA. Third, there is a tension for us arising from the efforts we make to encourage new and smaller players. My involvement in this line of work really began with the collapse of the largest, and apparently well-diversified, bank in the world right here in the UK. And I have been involved in and observed numerous other episodes of big banks getting into trouble. So I will never believe that there is something inherently safer about larger banks. But nor do I believe the opposite, and there are plenty of examples of smaller banks getting into 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  trouble, in some of which I’ve been heavily involved. So it is perfectly natural that with our safety and soundness objective in mind we should take a close interest in small firms as well as large, particularly when they are fast-growing, heavy users of central bank funding schemes, concentrated in higher-risk niches and/or untested in a downturn.
And finally, I do worry about diluting overly the focus of the prudential regulator, which was I’m sure one element of what led to the financial crisis. The same logic applies to a competitiveness objective, which surprisingly often gets confused with our competition mandate. 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  Seventh, five years on, I am slightly worried about a looming political economy problem. We have I think taken quite an expansive view of our secondary competition objective, by which I mean that we have been vigorously prowling all parts of the PRA’s terrain actively looking for things we can do to advance the objective. But our terrain is not limitless, so the flow of new initiatives will I think slow, and we will have to spend more time tangling with more difficult questions of the sort I have discussed today. I am worried that people may infer from a lower volume of announcements a reduced commitment to our secondary competition objective. There is no such reduction in commitment – we are simply implementing our commitments thoroughly. Those taking an interest should hold us to account for that, and press us on what we can do in the next five years about the more awkward questions which now confront us. So to sum up: in my view the competition objective has had quite a profound impact on the PRA’s activities and approach over the last five years.