Future Forum | Bank of England

Submit your questions and ideas now for Deputy Governor Jon Cunliffe

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Future Forum
Future Forum | 2 months ago | in Banking on a new world

Our Deputy Governor Jon Cunliffe will be answering your questions on financial innovation, risks to financial stability and the work the Bank of England is doing to keep your money safe on Thursday 13 December at 2:30pm.

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.

edited on Dec 13, 2018 by Michelle (BoE Moderator)

Rwth Hunt 2 months ago

I can't comment on every detail, but I do think that the proportion of profit to the investor and that to the agents needs to be controlled. The banker is entitled to a fee for his/her work, but this should be clearly defined. If he has to obtain the capital from a different source he must not be able to add the middleman costs to the costs of provision. Interest on loans is the rent on the money and the provider should pay costs out of that, and not add it on.

There should be an absolute ceiling of x% APR on all Loan interest, for whatever purpose and the borrower should be entitled to a deduction in retrospect if the loan began on or after the baseline date. This date should be the same as the one the First new rule is implemented, and not argued about for years on end and shimmered in stealthily at the end.

Frank Wolstencroft 2 months ago

Banks create money ex nihilo whenever they make a loan.

Conjuring money out of thin air and then lending it out at interest has been the biggest deception ever perpetrated on the public.

Graham Gardner 2 months ago

Not only that, every bit paid back is profit for the banks, not just the interest.

Frank Wolstencroft 2 months ago

That is not quite correct, since the bank deletes the principal of the loan back out of existence as it is repaid, but the bank gets to keep the interest on money it created out of thin air, when it granted the loan.

EGRowlands 2 months ago

Conjuring is the right word for money creation and how the trick is done needs much more exposure. There is an obesity of debt and the interest charged can be obscene. Our economy is being run on debt, with much personal debt based on imported goods that come from outside the UK, and much personal income that comes from services limited in scope to delivery in the UK. As with medical obesity the quality and quantity of the money supply needs to be controlled and as with medical obesity there needs to be both controls and nudging to change behaviour at both a corporate and individual level. What price for a free market if we are slaves to it?

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Michael Wilkinson 2 months ago

The banking crisis and inquiries into it and the scandals emerging in its wake, represented an opportunity to reform corporate governance and to re-define in whose interest a company should be run - at least as far as banks are concerned. The PCBS's proposal to put "the financial safety and soundness of the company ahead of the interests of its members" (PCBS, 2013b, p344) fell by the wayside and is a missed opportunity. Does the Bank of England consider that this issue should be revisited and consulted upon? Does it have any views about watering down shareholder primacy and focusing governance for banks more upon making them long term sustainable?

Colin Newman 2 months ago

What steps is the Bank taking to tackling high levels of private debt?

Frank Wolstencroft 2 months ago

In the fractional reserve banking system, all money is created as interest bearing debt when the banks make a loan.

Without debt there would be no money.

Graham Gardner 2 months ago

But there could be - if the BOE created the money then gave it to the public. Universal Income???

Karl Satherley 2 months ago

Is there any reason why money can't be created without debt attached to it? The world is drowning in debt and the poor and middle classes are taking the brunt of the austerity that the debt incurs.

AndyN 2 months ago

No there is not, see https://positivemoney.org/ for a group suggesting an alternative.

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Rod Dowler 2 months ago

What steps does the Bank of England plan to take to help increase UK productivity and how quickly should we expect results?

Dr Robert Jones 2 months ago

One known area is the lack of distribution of working capital across the class economic divide and small businessess.

Rod Dowler 2 months ago

Yes, but the issue is whether the BoE has any tools to target such problems or whether other redistributive measures or incentives to the commercial banking sector would be more suitable.

AndyN 2 months ago

The Bank of England has tools already to address the redistribution of wealth to those more likely to make use of it to increase productivity (rather then the wealthy who simply generate property bubbles with it). The problem is that it uses them to do exactly the opposite. The use of Quantitative Easing by purchasing bonds (i.e. giving it to the wealthy) rather than just giving the the money to the people from whom it was being taken (taxpayers) was the biggest redistribution of wealth in recent memory and it was from the poor to the rich.

Ever since I can remember the productivity of the UK has been reported as being low and I've always wondered why that's still the case given that most people are working harder than ever before. I've come to believe that the reason for the UK's 'low' productivity is that there are too many people in the finance industry effectively producing nothing but having to be paid huge wages and bonuses and those 'wages' and 'bonuses' end up offshore somewhere or part of a cunning tax scheme where everything they buy is offset against a corporation in the Cayman Islands and so yield no tax in the UK.

The BoE knows all this but is incapable of thinking outside the box forced upon it by the financial services sector or is unwilling to upset the vested interests of the square mile.

The issue is why are the BoE knowingly redistributing wealth from the poor to the rich...

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James Hunter1 2 months ago

The financial sector is highly exposed to the dangers of climate change. When will the Bank of England force financial firms to disclose their exposure to climate risk?

(BoE Moderator) 2 months ago

James, thank you for submitting your question to this session.

Jo Place answered a similar question during her session, I thought helpful to set this out for you below:

· The Bank and the Governor have been vocal supporters of the Task Force on Climate Related Financial Disclosures (TCFD) and see disclosure as an important tool to allow the market to assess firms’ exposure to climate risks, as well as for firms to assess the climate risk associated with the entities they are exposed to. The PRA has recently published a draft supervisory statement on enhancing firms’ approach to managing the financial risks from climate change. It set out the PRA’s expectations for regulated firms to develop and maintain an appropriate approach to disclosure of climate change risks. That includes engaging with wider initiatives on climate-related financial disclosures, such as the TCFD.

· The TCFD is an industry-led initiative, by the market for the market, and the next phase must be one of industry-led adoption and experimentation. Good practice will develop over time as firms try different approaches, taking on board feedback from investors and learning from others.

· Our view is that it is important that TCFD recommendations should remain voluntary for the time being to allow good practice to emerge.

stevegolf 2 months ago

Will independent currencies be allowed to coexist? For example cryptocurrencies.

Jon Cunliffe 2 months ago

Over the centuries many things have been used as money in different societies and we have learned that for an economy to prosper it is vital that people have trust in the money they use - that it will be accepted when they us it to buy things, that they can store their wealth in it, and that its value is stable. Ensuring trust in the national currency is the core function of the Bank of England. We do this through monetary policy, which keeps the value of our money stable. We do it through our supervision of the banking and payment systems, which makes sure people's money is safe. And we do it through the cash we issue. Technology has changed the way we use money dramatically over the last 30 years and will continue to do so. We are constantly thinking about how technology has changed and will change the way we use money and how we can maintain trust in money and support innovation.

As I argued in my speech earlier this year that I think it’s unlikely that cryptoassets will become widely used alongside traditional currencies any time soon. Cryptocurrencies don't meet any of the tests above well. Nobody stands behind them. They’re not widely accepted in transactions and their value is very volatile so they are not a good store of value, which means that no-one uses them as a unit of account. There are also significant barriers to them becoming more widely used in the long term – for example, existing cryptoasset platforms have limited capacity and cannot handle more than a fraction of the payment volumes that are handled by traditional payment systems (such as Visa, Bacs or Faster Payments) every day.  

In terms of the regulation of cryptoassets, the Bank of England has been involved in a joint project with the Financial Conduct Authority and HM Treasury. You can see the final report of the Cryptoasset Taskforce at the link below (Chapter 5 covers the actions that the three authorities will be taking). But there are no plans to make cryptoassets illegal.
https://assets.publishing.service.gov.uk/gove...t_final_web.pdf

Marco Saba 2 months ago

Translation: with the blockchain technology no bank will be allowed to create any more a deposit out of thin air, and the mismatch in bank accounting for money creation - i.e. the fact that new money is NOT accounted for as an inflow in the cash flow account of the bank BUT it is accounted as an outflow when we credit the customer A/c, thus hiding the profits from capital creation - can no more be hidden from the public. So we choose not to forbid outright the use of cryptocurrency but we do our best to discourage the public by boycotting the exchange between fiat and cryptos. Establishing a monetary cadastre visible to the public is not in our best interest because it will exposes all our shenanigans to transfer wealth from poor subjects to the sovereigns of our choice.

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stevegolf 2 months ago

Does the climate change/global warming scam influence bank policy?

rekindled_ai 2 months ago

Is it possible for the CBofE to envision a world in which self-sovereign currencies like Bitcoin and Monero exist alongside traditional fiat currencies (whether physical or digital), and if so when would regulation to this affect be implemented?

If not, can you please advise on how legislation will be enacted and deployed in an attempt to make these cryptocurrencies illegal, given their decentralised nature.

Phil Joyce 2 months ago

Does The Bank of England have the power and the will to end the creation of money by means of debt, as excersied currently by the private banks? If so when might that happen?

Graham Aldridge 2 months ago

Why does the Bank of England make "worst case scenarios" sound like actual predictions?

Andrew Davison 2 months ago

When doing QE, why didn't the Bank of England buy Gilts directly from Government instead of from the open market? Wouldn't funding Government in this way have gotten money into the economy via the most needy in society instead of the most wealthy?

If the retirement age population is increasing and the working age population is diminishing, does this mean that more loans are being repaid and fewer taken out, and does this shrink the money supply due to the fractional reserve banking system? In such a scenario what will the Bank of England do? Is this what happened to Japan?

AndyN 2 months ago

The standard answer to your first question is that buying guilts directly from the government doesn't put money into the economy unless the government then increases spending as a result. Buying gilts from the market forces the owners of those gilts to find somewhere else to invest the money paid to them for the gilts. The government let's not forget was hell bent on austerity at the time.

The really massive problems here are that this money doesn't find its way into the productive economy, most of it ends up in assets such as housing or (in a documentary I watched a couple of years ago) invested in the classic car market which apparently until QE came along was on it's knees following the crash. A small percentage goes into the productive economy (less than 7% I seem to remember from some research somewhere) and the rest fuels asset bubbles.

Even the guy who invented QE says it doesn't work in the way that the PoE have implemented it https://www.bbc.co.uk/news/business-24614016

You are IMO totally right in thinking that it would have been much better to basically give everyone in the UK a percentage the QE bonus and let them spend it where they wanted. Some of it would have boosted exports and some would have paid off debt but better than almost all of it ending up in asset bubbles and tax havens....

Sarah Lasenby 2 months ago

What steps is the Bank taking to tackling high levels of private debt? This is one of the main drivers of inequality and this effects all sectors.

Jon Cunliffe 2 months ago

Unsustainable levels of private debt in the economy certainly can create systemic risks. It is the job of the Bank’s Financial Policy Committee to watch these risks carefully, report on them publicly and act where we need to.
UK households as a whole have worked hard since the financial crisis to pay down their debt, and the amount of debt they have relative their income has come down noticeably. Debt is now growing broadly in line with incomes. But as the FPC has said the amount of debt to income in the UK remains high by historic and international standards.

The FPC has taken a number of steps to avoid an unsustainable built-up in private sector debt. This includes
· Limiting the amount of mortgages that banks lend if the mortgage is more than four and half times income and ensuring that borrowers can pay for a new mortgage even if interest rates go up sharply by 3%. This reduces the risk that in an economic downturn, households who have a lot of debt have to cut back a lot on everyday spending, which makes the economic downturn a lot worse. This was one of the reasons why the recession after the financial crisis was so deep and went on so long.
 
· Making sure banks have got enough capital to absorb losses and can continue to lend even in a very bad economic downturn. To ensure this, we run stress tests on the banks each year. These tests are very severe. The economic downturn banks have to weather is not what we expect to happen but what could happen in a worst case. In the 2018 stress test we assumed:
o that residential property prices fell by 33%;
o that banks incurred £29 billion of losses on their consumer credit books; and
o that losses on risky loans to companies were over one and a half times what they were in the financial crisis
 
The UK banking system passed the test. You can read more about it in the Financial Stability Report from last month.

Parliament has given the FPC the job of ensuring financial stability – the question of tackling inequality should be done by elected politicians.

However, the Bank can help by ensuring that the financial system doesn’t cause or make economic downturns worse as it did during the economic crisis. This helps growth, preserves jobs and prevents inequality becoming worse. It is the poor who suffer most from economic recessions.
Similarly, the MPC’s decision to provide quantitative easing has led to a quicker recovery from the last crisis, and there is evidence that it has thereby reduced inequality.

AndyN 2 months ago

Quantitative easing may or may not have led to a quicker recovery if you can convince most people in the UK that they're in the middle of a recovery.

What isn't in question is that any effect that it did have was extremely expensive as even by it's own very optimistic estimates the £375bn of QE led to only a £122bn increase in money supply. What the BoE also admits is that QE caused a redistribution of wealth from the poor (tax payers) to the rich (asset and bond holders).

The BoE like politicians, financiers and the wealthy is using the pseudo science of economics as a justification for its mistakes. Having been an engineer for 30 years studying the science of complex systems my research into economics since the crash has convinced me that beyond the limited application of supply and demand economics is at best a self fulfilling prophecy and at worst a way to push through personal agendas hidden under so much complexity that it's impossible for them to be checked.

An interesting example is the case of Myron Scholes and Robert Merton winners of the Nobel Prize for Economics in 1997 who created an equation for pricing derivatives, got rich from using the equation and everyones belief in it (and a Nobel Prize of course) then ended up with the company they became part of to exploit their genius going bankrupt https://www.theguardian.com/theguardian/1999/.../features11.g21 in an 'Emperors new clothes moment'.

The other crime continually forced on us by economics is the statistical anomaly that activity in building new houses goes straight on to a countries GDP number. Politicians and economists wanting improved stats to throw at people therefore happily push huge amounts of money into house builders pockets. Help to Buy has put billions of pounds into house builders simply to increase GDP. People get houses but at inflated prices that just pump up the housing market. Once again great for the wealthy who own these assets but terrible for everyone else. To add injustice on top of injustice the money to do this has come from tax payers...

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Nik Mitev 2 months ago

At present, private banks have the power and responsibility to create new money for the economy by issuing loans. This has malfunctioned in a variety of ways, notably by leading to house price inflation and by exacerbating an already painful inequality problem. I strongly believe the state should be the single authority capable of creating new money, through a properly regulated democratic body working in the interest of the people rather than shareholders.

Jouko Salminen 2 months ago

State money is money for dictators and for war. Only democratic money is money which born in all peoples over the Word, not for states. From central bank to peoples account.

Nik Mitev 2 months ago

I guess I worded this poorly... but I did say 'through a properly regulated democratic body working in the interest of the people'. How would you suggest democratic money is governed?

Jouko Salminen 2 months ago

Central bank has an idea how much new money is needed. Cb. puts M0 money into the peoples account. Solvency requirement of banks can be about 70%. in fact banks cant make new money if M0 money given enough, even the Sc. is 10 %.


FIAT is working well in upswing. But in
economic downturn , it does not work even in growth centers. We have poor people as long the FIAT is the only way to make new money.

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Sarah Lasenby 2 months ago

The financial sector is highly exposed to the dangers of climate change. Will the Bank take action to reduce the risks? Maybe by assisting the Government in taking the necessary actions to reduce the inevitable risks. If action is not taken as soon as possible we will suffer from the inevitable outcomes.

Jouko Salminen 2 months ago

Since 2016 ,at least, We had to been known that Friedman´s permanent income hypothesis had not newer worked. People are not going to take loan when days are dark.

Central banks has given M0 money 20 years only for rich because the new money from loan does not work in downturn.
The FIAT system is not a law of God. It is crime against humanity. If new money is needed, all new money must make by/for every people in the Word. Not for bank, and first off all not for states????

Ratidzo (BoE Moderator) 2 months ago

Hi Juoko, could you clarify your question please?

Andrew Shadrake 2 months ago

The financial sector is highly exposed to the dangers of climate change. When will the Bank of England force financial firms to disclose their exposure to climate risk?

Ian Bourne 2 months ago

The financial sector is highly exposed to the dangers of climate change. When will the Bank of England force financial firms to disclose their exposure to climate risk?

Denis O'Connor 2 months ago

When is the Bank going to change the rules on the £85,000 deposit protection scheme so that in cases where a bank defaults and it has not properly verified the identity of an account holder (and any ultimate beneficial owners) as per the 2007/17 Money Laundering Regulations ,the account holder is not entitled to compensation up to £85,000. As banks fund the deposit protection scheme, they have an incentive to minimise the number of eligible depositors. Depositors will not receive compensation through no fault of their own.

Richard Jackman 2 months ago

As a precursor to consideration of any changes, to what degree are the governors of the BOE worried by the lack of public (and also in particular MP's) awareness of how money is created - predominently by private banks in the form of debt?

Victoria Holland 2 months ago

What is the cause of high inequality in the UK and how can it be reduced in a fair manner without harming the economy?

Victoria Holland 2 months ago

Can we end fractional reserve banking?

Richard Jackman 2 months ago

I thought that this concept is no longer in play in UK. Perhaps Jon Cunliffe can confirm/explain this and also confirm that in practice the only real constraint on private bank lending is their collective confidence via the clearing system.

George Gordon 2 months ago

The BoE published a research paper in 2015 saying -
"The quantity of reserves is therefore a consequence, not a cause, of lending and money creation". The loanable funds model of private banking is dead.
See https://www.bankofengland.co.uk/working-paper...hy-this-matters

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Edward Carron 2 months ago

Neoclassical economic models are widely recognised as having failed to forecast the 2008 financial crisis whilst other models such as Steve Kene's implementation of MInksy's ideas) did so in a very timely and useful way. In its Q1 2014 report the BoE clearly tromped on neoclassical notions of the money multiplier upon which its models are based which suggests a shift away from adherence to the neoclassical model. I would like to know if the Bank of England has modified its modelling methods - as well as its views on money creation - to reflect the failures of neoclassical models and the successes of heterodox ones such as Steve's. My question relates not just to the forecasting of dramatic events such as 2008 but also to the impact of non government debt on the economy in less dramatic circumstances.

Dennis Harvey 2 months ago

Do you agree that stopping private banks from creating money would be a good innovation?

Richard Hibberd 2 months ago

Increase regulation to stop banks creating money which they then use to gamble on futures etc.

Geoff Plant 2 months ago

I've seen substantial debate on whether the UK government spends in order to tax or taxes to spend. As Deputy Governor you should be able to give us a definitive answer I would be greatful for your reply. Thank you

tcarb1 2 months ago

Given the lack of trust and the instability repeatedly generated by the debt fuelled monetary system, is it not time to call for a new global arrangement (new Bretton Woods) that addresses the difference between investment in financial "growth" and investment in public assets?

Bill Constable 2 months ago

I came to this conclusion and accepted the proposed solution in 2010 after considerable investigation.
The solution will never happen until more influential people globally realise that the problem started with Mrs Thatchers "Big Bang". The USA(Reagan) assisted(conspired?) in and then took the lead in creating debt & encouraging climate change, supported by New Labour(Blair with Clinton), eventually causing the "Global" crash in 2008 and the ever increasing wealth gap! There will be more crashes but how many can the BoE and all the other central banks and governments stand before it acknowledges the real issue?

Chris Todhunter 2 months ago

In view of the fact that financial markets have had some viciously destabilising effects, what powers does the Bank intend to use to neutralise the harmful effects of so called free markets?

diyLAW 2 months ago

If a bank lends a SME funds guaranteed by the owner can it securitize this loan?
If the SME defaults can a bank still call on the Guarantee of the owner?
Will the bank still benefit from any recoveries made from the insolvency process of the SME?

Antony Challenger 2 months ago

The financial sector is highly exposed to the dangers of climate change. When will the Bank of England force financial firms to disclose their exposure to climate risk?

delphineholman 2 months ago

When will the Bank of England force financial firms to disclose their exposure to climate risk?

MaiarTP 2 months ago

Would the BoE consider making the profitable from seigniorage of digital cash the sole prerogative of the central bank?

Frank Wolstencroft 2 months ago

When will the Bank of England issue debt free money in order to fund UK government spending ?

Who owns the Bank of England ?

Szczesny Gorski 2 months ago

Education, education, education - then widespread support.
It is nationalized.

Frank Wolstencroft 2 months ago

The Bank of England is owned by Nominees. But who are the nominees ?

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Szczesny Gorski 2 months ago

In its essence, the credit mechanism results in the creation of means of ex nihilo payments [from scratch], because the holder of a deposit from a bank considers it as available cash, whereas at the same time, the bank lent most of this deposit, which, whether redeposited or not in a bank, is considered to be a cash available to its
recipient. There is thus a monetary duplication in each credit operation. Credit system leads to creation of money ex nihilo by simple bookkeeping entries. Based essentially on the fractional reserve banking, this system is fundamentally unstable.
http://szczesnygorski.pl/wp-content/uploads/2...ujourd_hui1.pdf

gary bradley 2 months ago

Why are the people not told how money is REALLY created ?? (from debt)
Employees at my local branch of Lloyds did not know - as they thought loans were handed out from credited deposits. This is untrue - so why not inform / teach everyone the Truth ??
If there is nothing to hide - then why so much secrecy ??
If it was part of the school curriculum - things would change.

Jason Matthews 2 months ago

Because the magic money tree truth would be exposed.

gary bradley 2 months ago

Lloyds bank admitted in a letter that :- "The way that we fund personal loans is internal information which we would consider to be commercially sensitive. As such, I would not be prepared to disclose our methods for providing these funds..." That says it all really... :-(

Frank Wolstencroft 2 months ago

It is only reasonable for banks to lend money to people who are credit worthy and have the ability to pay off the loan principal and interest. Like, you know, they have a full time job rather than a part time gig.

Jon Cunliffe 2 months ago

I agree - it is very important that people understand money, how it is created, and finance more generally. In the Bank we have worked really hard to improve this, including though our school programme ("econoME") and school visits, which I do regularly. We held a Future Forum in Liverpool last year in which all the Bank's governors took part where we discussed how we could improve student's understanding of these important issues. Our Knowledge Bank article and the more in-depth Quarterly Bulletin on money creation give a really useful explanation of how the process works, and shows how it differs from the description in most university textbooks. I also spoke about this in my speech this year. I would encourage people to learn more about the process as it helps to understand how the Bank’s monetary policy works to affect the wider economy.
It is true that over 90% of the money we use is created by banks in the form of a claim on a bank. Although some, including some distinguished economists, have argued over the centuries to prohibit money creation through banks (so called 'narrow banking'), I believe there are benefits in allowing money to be created through the private sector. The benefits are that business and households are provided with credit they need to invest and manage their spending through good times and bad. But if banks are to be allowed to create money, we have to ensure that they are safe and operate under sensible controls to stop it posing risks to monetary and financial stability. That is precisely what the Bank does through our Monetary Policy Committee, Financial Policy Committee, and its supervision of banks, building societies, and the payment systems we use every day.

Patrick McGuinness 2 months ago

This is like thanking the people that sell you poison to drink because they have cut off your water supply!

Clearly there is nothing to stop public money being created to match the levels of the banks.

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Graham Gardner 2 months ago

By what act of Parliament are the High Street Banks allowed to create money. Before digital transactions had been invented, Parliament decreed that only the Bank of England should be able to print [create] money.

Frank Wolstencroft 2 months ago

The Bank of England should create all the UK money supply debt free to fund UK government spending, and also lend money to private banks at interest, who would then act as money retailers to the general public and corporations rather than be money creators.

Graham Gardner 2 months ago

Totally agree

Graham Gardner 2 months ago

But that still doesn't answer the question - why have the banks been able to get away with controlling the economy for so long.

Jason Matthews 2 months ago

The government given "banking" licence is all they need.

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Doug Carr 2 months ago

Why has it not been made public that bail-in rather than bail-out will occur when the next systemic bank collapse happens?

Jon Cunliffe 2 months ago

Things are very different now than in the financial crisis. Because of the work we have done we are able and very prepared to bail-in investors of banks when they fail, including the largest banks. This is all public. Our Purple Book ('The Bank's approach to resolution') sets it out. And it is seen as credible by the private sector – the implicit public subsidy enjoyed by the largest UK banks before the crisis has fallen by 90%.
Ten years ago like many countries at that time, the United Kingdom did not have a regime for dealing with banks which failed. This left two choices when banks got into trouble: let them fail or bail them out. Governments felt they had no choice but to bail the banks out.
Since the financial crisis we, along with Treasury and our international partners, have put in place reforms to ensure we can bail-in the banks' investors and avoid the "heads I win tails you lose experience" of the financial crisis, where those who profited in the good times did not have to pay in the bad. This will minimise the impact to depositors, to the financial system, and to public finances. This also incentivises banks to operate more prudently. The Bank has committed to Parliament that major UK banks will be resolvable by 2022 - banks will no longer be too big to fail.
This has meant Parliament giving us the legal powers that we didn’t have in the crisis and also ensuring we and the banks themselves have the operational capabilities to implement the steps necessary to continue to provide customers with critical functions so that we can impose losses on the bank’s shareholders and investors, rather than the taxpayer.
We are not at the end of the road yet but if a bank were to fail today, we would be in a much stronger position than in the financial crisis. This does not mean that resolution, in other words safely managing the failure of a systemic bank would be easy or painless. But the UK resolution regime we have been implementing will leave us much better equipped to manage financial failures. 
Once again, do have a look at our Purple Book which sets out in a lot of detail how we would deal with a failing bank nowadays and going forward, we plan to publish our assessment of the big UK banks’ ability to fail safely and we will also publish a consultation shortly on the next steps in putting the resolution regime in place – look out for it!

Mike Garrard 2 months ago

For those of you also getting 51,000 hits on 'The Bank's approach to resolution', and offers to book a museum Tour under 'Purple Book', I think Jon means this:
https://www.bankofengland.co.uk/-/media/boe/f...h-to-resolution

Nik Mitev 2 months ago

I could not find a definition for 'unsecured creditor' in the Purple Book... could you confirm whether a person with a current or savings account with a bank can be seen as an unsecured creditor under any circumstances? If that is so, can you foresee a failure contagion level at which the £85K guaranteed by the FSCS could be endangered?

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Herb Wiseman 2 months ago

The received wisdom from many politicians, economists and pundits that we hear is that debts/deficits are bad and a burden on future generations. In other words a liability. This then justifies harmful austerity programmes. But debts and deficits are both liabilities and assets. What kinds of things can the BoE do to ensure that debts/deficits are assets for the people and not just the money-lenders?

Duncan Pickard 2 months ago

When will the private banks be deprived of their ability to create money from nothing and lend it at interest? Money for government investment should be produced free of interest under government control.

Lindsey March 2 months ago

We need a new system that prioritises the survival of life on earth, which means first of all divesting from fossil fuel, and then retracting our lifestyle to stay within the earth's resources

James Steuart SKINNER 2 months ago

Why does the B of E (the Bank) not control the amount of money in the economy by only issuing new money to the Government’s account, not as credit, but as straight transfer of newly created currency, to be used by Government for budgeted Government expenditure? The Bank could then change the rules on reserves to be held by commercial banks to 100%. Banks would then become what they often claim to be - brokers, rather than lenders in their own right. Government would not have to borrow in the national currency. It could choose to pay a Universal Basic Income and/or invest equity in specialised public banks such as a Green Investment Bank as well as paying other budgeted expenditure up to limits that the Bank (not the Government) deemed safe from being inflationary. This would make it less difficult for the Bank to control the amount of money in the economy than using the clumsy and often ineffective method of raising/lowering interest rates. Only when the Bank closed the supply of money to the Government account would the Government have to turn to funding itself by taxing or borrowing. By this method lending would be reduced and new money could be guided to where it is most needed for the public benefit, rather than where it will provide most profit at least risk for the commercial banks. It would however have to be a condition of changing to this method that Parliament first introduced single transferable vote so that Parliament would be democratised. This looks like happening anyway as one (the only?) good result of the Brexit mess.

Frank Wolstencroft 2 months ago

If the Bank of England created Positive debt free money in order to fund UK government expenditure, the easiest and simplest way to control the rate of inflation of the currency is to have the Inland Revenue delete some of it back out of existence as required. After all, it it is just a data entry on a bank computer these days.

This is what private banks do as the principal of a loan is repaid, but they get to keep the interest. This is why we have continual inflation, since more money must be created (as debt) to pay the interest, the total of which increases exponentially.

A Tizzard 2 months ago

If you agree that inequality is harmful to society, what would you like to do to reduce it in the UK?

Andy Philpott 2 months ago

If there is a contingency plan in the event of another financial crisis, where the Bank might once more hold an intention to consider Quantitative Easing, will this money be put into the real productive economy where it will be much needed instead of the speculative bubble economy yet again?

(BoE Moderator) 2 months ago

Andy, thank you for submitting your question to this session.

Our job, here at the Bank, is to ensure monetary and financial stability (i.e. maintain inflation close to our target level of 2% and ensure that the financial system is resilient and robust to potential future shocks). In terms of monetary policy, and the tools that the Bank uses to meet it's inflation target, we have made clear that our primary instrument is the setting of interest rates. But, you could imagine certain situations where the Bank may consider the use of other tools, including QE, should economic conditions warrant it.

In terms of how QE works, QE is designed to impart broad, material stimulus to the real, productive economy by signalling about the future path of Bank Rate, lowering long term borrowing costs and boosting, for example.

Graham Abbott 2 months ago

QE was so obviously a stupid idea - why couldn’t you encourage the government to spend the money on Welfare for the disabled, public sector pay and more NHS funding as that would have all ended up in the real economy?

Roger Kirman 2 months ago

Given the challenges presented by climate change, ever increasing inequality and political stalemate in the UK, what chance is there that banks will increase the level of investment in the real economy?

Does the BoE accept that its policy of QE has increased inequality in the UK and if so, what is the justification?

Are we going to see some of the proposals put forward by Positive Money accepted by the BoE and if so when?

Jeremy Wire 2 months ago

Reuters has reported that 'Investors managing $32 trillion in assets call for action on climate change'. How will you be facilitating that?

barry brown 2 months ago

Why is credit control not being used to force banks to lend to the productive parts of our economy (not the finance sector)

Frank Wolstencroft 2 months ago

No one should be able to "force" banks to lend to anyone. "Encourage" might be appropriate.

Jon Cunliffe 2 months ago

In general, economies where the private sector makes these decisions have proved effective at getting resources and credit to the most productive parts of the economy. However, there can be market failures where this does not happen which need to be addressed by governments. Doing this can have clear and direct impacts on the distribution of wealth and income, which is why elected governments should decide, not central banks.
As an aside we do regular surveys on the availability and price of lending to companies. The surveys show at present that companies can borrow reasonably easy, although this is most true for large companies than small ones. The Financial Policy Committee of the Bank monitors lending as whole to make sure it is sustainable and not creating risks to the economy.

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Dr Robert Jones 2 months ago

The future on transactions on networks involve the discussion upon cyber security and national security. Mi5 were correct in pointing out that critical software is engineered or controlled by other countries and is a security vulnerablity. Is it about time to accelerate the onshoring of software development,stockexchange,processing in the UK and limit the use of overseas developed software in enterprise certification ? This country needs to develope its own secure operating systems and manage them on shore for national security reasons?

Dr Robert Jones 2 months ago

Many people beleive that part of the long term recessionary pressures and under performance of our economey is the unwise money and lending criteria leading high levels of unsecured debt. The closure of bank branches will by 2020 leave upto 22 million people mostly disabled and elderly with no access to market driven financial products. Will you now resculpture the regressive lending criteria to include these sections of the economey ? Whilst the housing market is artificially expensive in some areas compared to wages will the bank put back mortgage credit controls upon lending back to maximum lending of 80 % of house equity ?

(BoE Moderator) 2 months ago

Thank you for submitting a question to the session, Dr Robert Jones. You raise two important questions. I have answered both below.

First, on financial inclusion, while primary responsibility for this doesn't fall to the Bank of England, it is really important to us. The Bank's remit is to deliver economic and financial stability. Our decisions are wide reaching, so it is incumbent upon us to make as clear as possible what the Bank is doing, and why it matters. We have produced educational resources to help the public understand what we do and why, called EconMe. This is aimed at school children. We have Bank Ambassadors who go out to schools across the country and talk about their careers, every day financial decisions and economics. We are committed to making sure we communicate clearly, to members of the public. Our new layered publications, such as the inflation report, are designed to do that.

There is a separate issue in this question, about access to physical bank branches. This falls in the remit of the Financial Conduct Authority. But, the work the Bank does on the provision of cash is relevant here: we've made clear that we will continue to provide cash at levels that meet the demands of the people of the UK. And, we are considering how we can support innovation that might increase the accessibility of financial services, as a part of our work on the future of finance.

To your second question, as flagged in a previous question on house prices: the FPC has set limits on mortgage lending to highly-indebted borrowers. You also highlight risks from unsecured debt. The FPC and Prudential Regulation Committee (PRC) assessed these risks in detail in 2017, examining both asset quality and underwriting practices. We took action then to ensure lenders are able to absorb stressed losses on consumer credit - by incorporating a severe consumer credit loss rate in the 2017 stress test. A similar judgement on the appropriate loss rate for the UK consumer credit sector was also used in the 2018 stress test.
The FPC set out its latest view on risks from both mortgages and consumer credit in the November 2018 Financial Stability Report.


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Godolphinhill 2 months ago

Please make it easier for Regional banks to form. The requirements at present are too onerous for, say a Cornish Bank to be founded but this would aid local resilience and enable more sensitivity to local needs.

Ramblingsofabard 2 months ago

One of the biggest risks to the financial industry is Brexit. We’ve seen the BoE s predictions on what a no deal scenario would do to the economy and to the level of interest rates. While the BoE is independent and does not interfere with the government’s affairs, if a government is about to shoot itself in the foot and lead the country to the dogs, can’t the BoE do anything? Can no one stop the government from making a stupid decision?

Frank Wolstencroft 2 months ago

When Brexit actually occurs, the UK government will be saving the 19 billion pounds per year it currently pays to the EU.

Ramblingsofabard 2 months ago

Hi Frank, not the forum to discuss the merits of Brexit. So would resist responding to how misguided that quoted figure is. My question was merely to understand what is in the BoE s powers to influence. Thanks

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Richard Ash 2 months ago

How will the Bank of England act to avoid the UK's financial system being an agent of destruction at home and abroad, by funding climate-destroying projects which will threaten our global climate, and the UK's financial system when they collapse?

Alan Pengelly 2 months ago

Why did BoE allow quantitative easing to effectively make housing too expensive for ordinary mortals. It made a lot of builders rich by reducing price pressures artificially. It should have been used to start up new or support businesses. Instead some banks forced closure of viable small businesses by devious means to grab their assets. Those people that managed to get a mortgage (bank of mum & dad etc) now have unbelievable amounts of debt. I bought my first house at 24 and paid it off before 60, with an ordinary (fairly highly) skilled job.

George Gordon 2 months ago

If we leave the EU, the strictures of the Maastricht treaty will no longer be in force.
If that happens, the UK could stop issuing debt, and use the ways and means account instead to pay for government spending. Do you agree?
If you disagree, could you please explain why.

Sara Holland 2 months ago

Has the BoE considered as an alternative to NAIRU, a central government funded Job Guarantee as a preferred automatic stabiliser. It provides a superior macroeconomic stability framework for full employment and price stability. This would deliver counter cyclical aggregate demand, provide publicly useful, community determined work and would be a superior buffer stock to the existing involuntary unemployment/NAIRU approach. Would the BoE consider hiring an experienced Modern Monetary Theory economist such as Professor William Mitchell or Warren Mosler to assist the BoE is designing such a scheme for the U.K.?

Richard Sibley 2 months ago

I would like to know if the BoE has plans to better fund the real economy, by scaling back capital flows to fund financial trading volumes, which doesn't create practical improvements to life outside the financial sector. E.g. As the housing market restricts home ownership, could the BoE help, by supplying capital to fund other types of homes - to create home ownership in boats, cabins, motor homes or shares in companies set up to provide multiple occupancy homes for investment providers who could afford an equity mortgage? My point is, that if people had a way throughout their adult life, to avoid being a rental tenant - the money they earn, could always give them an asset and a step towards a better home to own later on.

Manfred E. Will 2 months ago

BoE has opened up RTGS to non banks/PSP recently, ECB last month gave banks access to TIPS, others to follow. The objective, transition to instant financial market infrastructure.

I am wonderig how businesses are supposed to cope with that? Very often they are in the middle of a value and/or payment chain. What happens in case of disruptions (technical failure, human mistake, cyber crime, force majeure, etc. pp.)?
Immagine no incoming payments in combination with unchanged payment obligations. It seems, there is a risk of default even for healthy businesses. Especially, instant payments will be executed 24/7/365. But most corporate treasury departments are not working round the clock.

Do we need a backstop, firewall, protection mechanism to complement instant financial markets?

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Michael Nicolaus-Heuser 2 months ago

What steps is the Bank taking to tackling high levels of private debt? The financial sector is highly exposed to the dangers of climate change. When will the Bank of England force financial firms to disclose their exposure to climate risk? How would the Bank respond to another financial crisis?

Frank Wolstencroft 2 months ago

Without debt there would be no money in the factional reserve banking system.

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