“Consistent with the idea of resilience,” Bailey told attendees, “there are two key questions to ask about the buffers: are they sized consistent with the financial stability objective; and are they in practice usable in times of stress? We have to keep both of these questions under almost continuous review.
“Post-Brexit, it is necessary that we review and, where appropriate, revise the regulatory system to make it consistent with our UK-specific objectives. When I say ‘UK’, however, we must recognise – as TheCityUK does – that we are a leading global financial centre. So, our financial stability objective is a global public good, as the IMF has previously noted. We must therefore continue to be closely involved in shaping international standards, and then implement them properly. I can assure you that we are doing both of these.”
Read more: ABI chair on Solvency II: “Our ambition is for sensible reforms”v
The BoE governor continued: “Moreover, when we decide to revise inherited EU (European Union) standards, we must ensure that they meet our public policy objectives. Let me briefly give Solvency II as an example – no after-dinner speech should contain anything more than the briefest description of Solvency II.
“At the heart of the prudential regime for insurers in the UK are the objectives of safety and soundness and policyholder protection. How we put those objectives into practice should also encompass any macro-prudential measures that we consider appropriate.”
Bailey stressed that he does not consider Solvency II to be best suited locally.
“Why would it be,” he asserted, “since it was designed to cover 27 countries? The case for reform is clear, but so is the need first to ensure we define and set our expectations on safety and soundness and policyholder protection.
“Then, consistent with these expectations, we can look to enable more support from insurers for productive finance and infrastructure investment, etc. That way we can ensure a resilient approach to the prudential regulation of insurers and so stability in the supply of finance.”
