By Brian Quinn, Executive Director, Financial Stability in the Bank of England.
In a wide-ranging survey, Brian Quinn—Executive Director, Financial Stability in the Bank—suggests that the recent coincidence of a much more competitive environment and a pronounced cycle in economic activity has played an influential part in supervisory developments.
He argues that economic cycles tend to produce exaggerated swings in banks’ profits; successful moderation of the cycle - by the early and judicious use of macroeconomic policy - might be the most important development in regulatory practice. Banks could in addition make their own contribution, by improving their risk analysis; and he sounds a note of warning against lenders rationalising away the lessons learnt in the recent cycle.
He also draws attention to the increase in financial criminal activity, and suggests that a recent UK innovation to improve the exchange of information among regulatory and criminal-prosecution authorities might serve as a model for wider international co-operation in this area.