Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, to the CBI, Institute of Directors, Leeds Chamber of Commerce and Yorkshire Forward at the Royal Armouries, Leeds, 21 October 2008. *  *  *  My first memories of Leeds are from a wet summer in 1958. I was ten years old, we lived on the moors above Hebden Bridge, and my father took me to my first Test Match –England against New Zealand at Headingley. It rained all day on both Thursday and Friday, and, when play started in mid-afternoon on Saturday, on a drying wicket New Zealand were bowled out by Laker and Lock for 67. So I became a slow bowler. I was taught to bowl – slow left arm – at Old Town primary school by the headmaster, Alfred Stephenson. During the morning break he would mark the wickets in chalk in the playground, and draw a small circle exactly on a length. If we could pitch the ball within that circle he would give us a farthing. As we improved, and the payout of farthings increased, the morning break became shorter and shorter – my first lesson in economic incentives, or what is known in the trade as “moral hazard”.
The constraints imposed by such a financial infrastructure, and the inadequacies and inefficiencies attendant thereto, provide key justification for the development of the capital market which will play the lead role for mobilizing domestic and foreign investment, as well as engendering low cost, efficient, financial intermediation. While in our financial sector development we have taken steps to improve the payments system, supervision of banks, strengthening their capital base, and enhancing efficiency in general, we have also put strong emphasis on ensuring the emergence of a comprehensive financial sector, that will meet the demands of an emerging market economy such as ours. BIS Review 107/2007  1  In the process of developing the capital market, we have worked with private sector and external development partners, especially the First Initiative and the Commonwealth Secretariat, to put in place a robust legal and regulatory framework that will facilitate the process. Through the Resident Consultant provided by the First Initiative, we have defined the system of regulations that would guide the operations of the capital market, and the stock exchange in particular, in all facets of its operations. We have ensured that these are consistent with acceptable international standards, and I can now confidently say that our stock exchange will operate with adequate safety and protection of the interests of the investing public. No one therefore should entertain any fears in transacting business through our stock market. The process of developing the legal framework has been participatory and transparent.