Supervision and central banking - Speech by the Deputy Governor

Quarterly Bulletin 1987 Q3
Published on 01 September 1987

The Deputy Governor discusses the interrelationship between the Bank's traditional role as central bank and its newer role as banking supervisor within a statutory framework.

The Bank's supervision developed from its operational role as a central bank. The extension of this role, as a result of the part it was able to play in the secondary banking crisis in 1974, was subsequently confirmed and formalised by the statutory powers conferred on it by the Banking Act 1979. Even in the new statutory framework of the Banking Act 1987, the Bank's supervisory activities will continue to reflect its position as central bank as well as its statutory powers; and its supervision-with its emphasis on flexibility and consultation-is still strongly influenced by its traditional, informal approach.

The Deputy Governor argues that the Bank's authority as central bank is distinct from its statutory authority as supervisor and is a source of additional strength in its supervision. He illustrates this contention by considering the Bank's role in support operations, in dealing with international debt difficulties and in ensuring proper standards of behaviour in corporate finance activities. He concludes that there have been significant advantages-in the United Kingdom at least-in combining supervisory and central banking roles, and expresses the hope that the financial community will continue to accept the non-statutory authority which the Bank is able to use alongside its legal powers.

PDFSupervision and central banking - Speech by the Deputy Governor

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