Future Forum | Bank of England

Submit your questions and ideas now for Deputy Governor Sam Woods

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Future Forum
Future Forum | 3 months ago | in Banking on a new world

Our Deputy Governor Sam Woods will be answering your questions on 16 November at 10:30am.

Submit your own ideas under the Banking on a new world section and post your questions in the comment section below. He will answer as many as possible during the session and looks forward to chatting with you all.

Sabrina Rochemont 3 months ago

This perspective (link below) of the global infrastructure of payments raises a critical question: Given the strategic importance of payments, does the UK have a comprehensive payments plan, and if there is a plan why isn't it public?

https://bluenotes.anz.com/posts/2018/05/longr...ure-of-payments

Florence (BoE Moderator) 3 months ago

Dear Sabrina, thank you for your question with details reference link.
Sam will be responding to all questions on Friday 16 November at 10.30 - don't forget to join the live Q&A!

Sabrina Rochemont 3 months ago

Thank you- unfortunately, I will be travelling at that time so will be unlikely to join live. Will the session script be released on the forum after the event?

Future Forum 3 months ago

Hi Sabrina, you will be able to read all of Sam's responses on this page and our visual scribe will be drawing pictures capturing the key questions and discussions. I will pop you a message when we post the drawings on the site. Thanks for taking part.

Ian Collier 3 months ago

Good question

Sam Woods 3 months ago

HI Sabrina. You are right that there is a huge amount of activity in this space at the moment, involving the Bank, FCA, Payments Systems Regulator and the banks themselves. For us the big thing is our plan to renew our own payments system, the snappily named "RTGS". We are coordinating across these various bodies, but we can always do better!

Oliver (BoE Moderator) 3 months ago

Thank you for the question Sabrina. As Sam mentioned, we coordinate with the Payments Systems Regulator. The PSR Policy Statement is available on their website and sets out how they will regulate the payment systems industry to deliver better results for everyone who uses those systems.

The PSR also publishes an Annual Plan and Budget for every year. In the plan they set out their aims and a summary of their anticipated activities and expected costs for the next twelve months.

You can read the Policy Statement, 2017/18 Annual Plan and find out more on their website: https://www.psr.org.uk

Sabrina Rochemont 3 months ago

Thank you, I'll take a look at your recent RTGS specs and the psr plan.

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Ramblingsofabard 3 months ago

A subset of the UK’s population remains unbanked. Some figures put it around 2 million. While there is a global push towards a digital future and a cashless society, availing the benefits such a transition allows, how do we proceed without leaving this section of society behind?

Shelley (BoE Moderator) 3 months ago

Thank you for your question. Pop back on Thursday to see Sam's responses.

Sam Woods 3 months ago

Hi Ramblings. This is a very important issue which I've spent quite a bit of time on. Some of it is about the banks but there is also a very important role for other sorts of institutions. First, credit unions of which there are around 500 here in the UK. We oversee them, and I have visited quite a few over time including one in Leeds last month. Then there are "CDFIs" - we don't have a role overseeing them as the Bank, but I did a lot of work with them in a former life. They do some great things but the sector remains very small at this point.

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Mervyn Hyde 3 months ago

Does the Bank of England make profits and how?

Sam Woods 3 months ago

Mervyn. Can I just check you are not our former governor Mervyn King "hyding" behind a new username? Now we do make profits - but they are very small compared to what the privately-owned banks make. And because we are owned by the taxpayer they all belong to you! Well ok, you and 60 million other people...

Ramblingsofabard 3 months ago

The BoE has introduced cyber stress tests as part of the banking stress testing regime. These try to assess a financial institution’s ability to respond in case of a cyber attack. In particular, these will check a firm’s resilience to a DoS or DDoS attack. Are there any plans of extending the stress tests to other types of cyber attacks? In particular after the recent cases of loss of customer data (that may not lead to a disruption of service) and keeping in mind the layers of legacy architecture banks hold

Shelley (BoE Moderator) 3 months ago

Thank you for your second question!

Sam Woods 3 months ago

Hi again Ramblings. We are very interested indeed in this issue, and you are quite right that we are planning to use a variant of stress testing for this purpose. Basically our approach will be: first, to ask a bank how long it is acceptable for one of its services to be unavailable for; second, to see if we agree with that; and third, to simulate a stress on the bank to see whether it can actually meet those standards. To your question on DDoS - yes we will go much broader.

Ramblingsofabard 3 months ago

Thank you, look forwarding to reading more about such tests post consultation with the banks.

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Simon Youel 3 months ago

The head of the IMF has recently come out in favour of a central bank digital currency. She says "The advantage is clear. Your payment would be immediate, safe, cheap and potentially semi-anonymous... And central banks would retain a sure footing in payments."

Will the Bank of England be at the forefront in reaping the advantages of a central bank digital currency?

Shelley (BoE Moderator) 3 months ago

Glad to see you found the question page! Thank you for your question.

Sam Woods 3 months ago

Hi Simon. We're not intending to launch a CBDC in the near term because so far our analysis suggests that the benefits would not outweigh the risks. But we are doing a lot of work in this area, having started in 2015, and have recently released some research questions that we are looking at - please pitch in!

Oliver (BoE Moderator) 3 months ago

Thank you for the question Simon. As the IMF Managing Director, Christine Lagarde, concluded in that speech – “while the case for digital currency is not universal, we should investigate it further, seriously, carefully, and creatively.”

With that in mind, the Bank is continuing its research on this topic and we welcome contributions to help us shape our research in this field.

You can find the list of research questions and more information here: https://www.bankofengland.co.uk/research/digital-currencies

View all replies (3)

Manfred E. Will 3 months ago

Before GFC banks acted as countercyclial buffers between markets and NFC. Due to regulation and fintech/digitization market turbulences will NFC fully. Do we need additional infrastructure as a backstop, especially once financial market infrastructure becomes instant?

Shelley (BoE Moderator) 3 months ago

Thank you for your question.

Sam Woods 3 months ago

Hi Manfred. Now I would argue that before the crisis banks did a terrible job of acting counter-cyclically, and that that is one of the reasons that the system imploded so spectacularly. We've now got an explicitly counter-cyclical part of the capital regime, currently set at 1% here in the UK - that might not sound like a lot but it is a big chunk of capital.

Manfred E. Will 3 months ago

Hi Sam Thank you very much for your answer. Studies by among others IMF and German Bundesbank seem to come to the conclusion that counter-cyclical part of the capital regime are actually intensifying the pressure to NFC during recessions/economic downturn. Bundesbank was even warning about the impact on financial stability. What do you think additional, independent backstop? Does something like that make sense from your point of view?

Sam Woods 3 months ago

Too early to say Manfred! I think our new regime will work better but the real test of that will be when we actually get into a downturn.

Manfred E. Will 3 months ago

I have seen Bank of England research about variation margin for centrally cleared derivative transactions. Because volatility events are happening more, regime is easier to analyse, more data available etc. Doesn't it make sense to base lessons about counter-cyclical capital regime on this analysis? In the end NFC bank credit, liquidity and collateral are identical on corporate balance sheets!?!

Manfred E. Will 3 months ago

From a mathematiocal perspective, a strong recession/jump in default rate seems to be similar to other volatility events. Losses due to natural catastrophe, force majeur, cyber attac, technical failure, etc. pp. have similar impact to bank capital position. I believe it makes sense to use collateral analysis as a reference. None of the above can be forseen, risk is latent, can't be managed actively. Insurance structures are better positioned.

Thank you very much for the Q&A, Sam. I am looking forward to future exchanges. Regards, Manfred

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Bruce Strachan 3 months ago

Technically Question -from a capital requirements point of view (see link below): given the strategic importance of "payments industry" , How does the BoE/authorities, treat the under-lining assets appearing on banks' balance sheet (i) As standard fixed asset subjected to risk weighted asset (RWA) requirements, or (ii) other - please advise?

https://www.investopedia.com/terms/c/capitalrequirement.asp

Shelley (BoE Moderator) 3 months ago

Thank you for your question.

Bruce Strachan 3 months ago

Thanks Shelley, getting clarity from Deputy Governor Woods on the above question; is the first step towards addressing a issue that is directly undermining the productivity of the UK/Global economy.

Sam Woods 3 months ago

Bruce - I'm bamboozled! Perhaps it's just because it's getting late in the week but I can't understand the question. If you can help me out and ask it in another way.

Bruce Strachan 3 months ago

Thanks, Sam, the story of my life, bamboozling people! Put another way, let's be forward-looking - consider financial markets infrastructure (FMIs) underlining assets, from a "Capital Adequacy Ratio (CAR)" perspective does the BoE currently give/make any concession to banks' in the CAR calculations; when it comes to holding these assets. Or are these assets included in the CAR calculation? Here's to a great weekend !!

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Simon Youel 3 months ago

The UK is reliant on strong global demand for its assets to finance a chronic trade deficit with the rest of the world. What policy instruments would the Bank of England use to maintain its financial stability objectives in the event of market volatility or capital flight out of the UK as a result of a government introducing policies which might threaten the attractiveness of UK assets, such as nationalisation or reforms which move the tax burden to the so-called 'FIRE' (Finance, Insurance and Real Estate) sector?

Sam Woods 3 months ago

Hi again Simon. Now I am going to ban all Brexit questions here on the Future Forum - surely we could all use a half hour off?

Simon Youel 3 months ago

This question wasn't just about Brexit, it was about maintaining financial stability in a globalised economy, as per the outline for this topic - "financial innovation in a global context, its implications and actions the Bank is taking to prepare for the new world".

I would have thought the Bank of England takes these concerns seriously!

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Elizabeth D 3 months ago

I'm not sure this is really a "banking on a new world" question, but I couldn't see another place to ask...
In the polling questions, you ask what means of payment people use, but the set of options seems to be missing some items. I certainly use cards and cash to pay for goods. But when it comes to services, I almost exclusively use direct debit and faster payments, and the proportion of payments I make this way is increasing (at the expense of cash and cheques). Is there a reason that these payment methods are excluded from the polling questions please?

Ivoni Mataj 3 months ago

Hi Elizabeth,
Thank you for your questions. This is more relevant to raise under "Money, Money, Money" topic.

Elizabeth D 3 months ago

I understand that, but there is no place to ask questions, except via these sessions with the DGs...

Shelley (BoE Moderator) 3 months ago

Thanks Elizabeth. We will be holding a session with the Governor Mark Carney in a couple of weeks, and he will be talking questions across all topics. When the page gets loaded please ask again if Sam doesnt answer. I will share the page once created.

Elizabeth D 3 months ago

OK. It seems a bit 'low level' to bother either the DGs or the Governor, since it's just about the design of the polling questionnaire, and the rationale for it, but if that's the only way to find out, then fair enough!!

Shelley (BoE Moderator) 3 months ago

Apolgises Elizabeth - I was answering your 'place to answer questions' comment.
Going back to your orginal post - our aim is that direct debits and faster payments are classifed under the use of card option. However, your feedback has been taken on board.

Elizabeth D 3 months ago

Thanks for the response, but I confess I find that baffling. Faster payments and BACS are not linked to cards (whereas apple pay is just a different way of making a card payment and you have listed that separately as a payment option). Maybe I just don't understand what it is that the poll is trying to measure??!?

Sam Woods 3 months ago

Hi Elizabeth. This is a very good and relevant question! We just chose the most popular methods, but you are right there are others and these will be covered in broader questions in other surveys. It is remarkable how fast all this is changing. In particular the arrival of contactless payment has really affected how people pay for things - you can see this in the stats, but it's also true for me personally (much to the annoyance of my colleagues who print banknotes!).

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Nathan Coombs 3 months ago

To what extent has stress testing lived up to the hopes of central bankers after the financial crisis that it could serve as a tool of macroprudential regulation? Has it contributed towards developing the agent-based complexity modelling of the financial system? And if so, how?

Sam Woods 3 months ago

Hi Nathan. I think stress testing has been a huge advance in prudential technology, both micro and macro. This is basically because it's no good simply knowing what a bank's capital position looks like in good times - we also have to have a view on what would happen in a downturn. But the technology will surely improve over time. Interestingly, on the insurance side we approach it stochastically and look at say 100,000 scenarios for a firm - we are a long way from that on the banking side.

Nathan Coombs 3 months ago

Thank you very much for your response. Just to clarify though: other than being involved in setting the countercyclical capital buffer and increasing 'resilience' through driving higher overall bank capitalization, have the tests served any other macroprudential purposes? At one point, it was believed that the data collected in the stress testing process could help macroprudential modellers within the Bank develop/improve their system-wide simulations of the financial system as whole. Is this work still ongoing?

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Sam Woods 3 months ago

Hi everyone! It has certaintly been an interesting week so far. But we're not on here today to talk about Brexit - we're talking about how the nature of money, banking and insurance is changing and how we should deal with that. I opened a digital bank account at the weekend (I'm not allowed to tell you which one!) - it is pretty cool!

Graham Mott 3 months ago

Do you feel that the launch of digital central bank money, like the possible E-Krona in Sweden puts central banks in conflct with commercial banks?

Sam Woods 3 months ago

Good question Graham - see my response above to Simon. Lots more to play for here on the research front - please pitch in with your ideas!

Bishopsgate Financial 3 months ago

How does the PRA/BoE forsee Blockchain changing the way that we bank? Also, how will it likely be regulated?

Sam Woods 3 months ago

Important to make the distinction here between DLT and crypto-assets. On the latter, to date we've concluded that this is not likely to affect our objectives much in the near term - though of course we have to keep an eye on it, as it's been a major issue in some other countries as I was hearing from colleagues in Korea recently (South I hasten to add!). On DLT we think the jury's out - it's not a solution to every problem but we are interested in understanding use cases, so please let us know if you have any.

Oliver (BoE Moderator) 3 months ago

As Sam mentioned, our Financial Policy Committee has assessed private cryptoassets and concluded that while the underlying technology has potential, they do not currently pose a risk to monetary or financial stability in the UK.

We continue to monitor developments in DLT. Please let us know if you think there are any interesting use-cases.

We also recently published the joint FCA, HM Treasury and Bank of England cryptoasset taskforce report, which you can read here: https://assets.publishing.service.gov.uk/gove...t_final_web.pdf

Bishopsgate Financial 3 months ago

Hi Oliver, I'm afraid to say that the link provided doesn't work. UPDATE: does now work, thank you

Oliver (BoE Moderator) 3 months ago

Hopefully this link should work and you can click through to the report: https://www.gov.uk/government/publications/cryptoassets-taskforce

Bishopsgate Financial 3 months ago

Thank you both for your answers! The DLT is what I was referring too, the underlying technology.

There are developments going on around KYC and payments, which is what made me ask the question of how it would be regulated. Clearly holding sensitive information on a DLT would have it's complications

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Dr Robert Jones 3 months ago

Future of Digital Money issues.
For digital money
1. Social and economic convince
2. Commercial efficiency

Against Digital money
3. Regulation blind people cannot access digital money
4. Social issues 21 million UK elderly are not engaged in the digital economy this is likely to grow as capital costs of digital entry grow in relation to incomes.
5. Privatisation of taxation by economic monopolies such as transaction costs
6. Cyber attacks both in times of conflict and increasing cost drag on the system
7. The hard currency is a national cultural and educational symbol
8. Capital flows may bankrupt countries or companies- recent experiences with bit coin show high frequency exchanges of cash can put small economies or organisations into bankruptcy quickly undermining confidence in the stock exchange
9. Nature teaches us that the confidence in hard currency is brought about by divestment of ownership. When public monetary systems fail social unrest will ensue.
10. Lack of availability of hard cash by the bank of England will lead to other sources of money been used and possibly the eventual collapse of the pound.

It is clear that digital money is part of the mix of options but not THE option. I have recently discussed with the NHS the failure of digital platforms should never mean the failure to deliver services in critical environments.


Shelley (BoE Moderator) 3 months ago

Thank you for contirbuting to the discussion. Please note that Sam's Q&A session has ended. Please visit one of our other Deputy Governors sessions if you wish to post your question there. Thanks!

Dr Robert Jones 3 months ago

The current issues give a good start to any discussion on the future of money.

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Amy Buckingham 1 month ago

This idea has been advanced to the current phase

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