Stephen G. Cecchetti and Jens Hilscher

19 March 2024

The Bank of England’s bond sales are having an enormous impact on the current UK government’s budget. This is because the agreement between HM Treasury and the Bank of England states that the losses are compensated by transfers as they accrue. From 2013 to 2022, the Bank of England made positive transfers, increasing government revenue by a total of 6.23% of UK GDP.

Magnifying glass focusing on QE for quantitative easing

Tomasz Wieladek

21 February 2024

Many commentators argue that QE had a significant role to play in the post-pandemic rise in inflation across advanced economies. However, central banks had to ease policy in response to the demand weakness during the pandemic. Would the inflation consequences have been different if central banks used conventional monetary policy instead?

The Bank of England building *Adobe Stock Image

Professor David Aikman

24 October 2023

Sarah Breeden, who is currently the Bank’s Executive Director for Financial Stability Strategy and Risk [FSSR], has been appointed as Sir John Cunliffe’s successor as the Deputy Governor with responsibility for Financial Stability, starting on 1 November 2023. The Deputy Governor for Financial Stability is an important post. The person who occupies this role clearly has a significant influence on the direction of financial stability policy at home. But there is also scope for the DG-FS to steer the policy debate on the global stage.

Interior of boardroom with armchairs by asbe, Getty Images

Richard Barwell

18 September 2023

The power of recommendation is one of the two key powers of the Financial Policy Committee. The working assumption of most FPC-watchers is that this power will be used in very specific ways: most often to make a recommendation to a specific regulatory authority to take a specific action, or to the Treasury, to recommend that the FPC be granted powers of direction over specific tools.

Credit suisse logo

Patrick Honohan

4 September 2023

One of the great innovations in financial stability policy worldwide over the past decade or so has been the development of an international standard approach to resolution policy for banks of systemic importance.  Through its active participation in international bodies such as the Financial Stability Board, the Bank of England was a central player in the elaboration of this idea, which has broad international acceptance, and indeed is being extended to central counterparties, insurance and beyond.

Vintage Neon Sign in Window of Pawn Shop by Marti157900, Getty Images

Ronnie Driver

17 July 2023

The failure of Silicon Valley Bank, and the ensuring contagion to other small US regional banks, have served as a forceful reminder of some of the fundamental risks that make banking a heavily regulated industry. There are many lessons to be learnt for bank executives, risk managers, regulatory designers and bank supervisors – as well as a reminder to macroprudential authorities that individually non-systemic institutions can become systemic collectively if they have concentrated and correlated business models and risk. The episode and its implications will no doubt be dissected for years to come.

The Bank of England and Royal Exchange, London by dynasoar, Getty Images

Professor David Aikman

11 July 2023

In this short blog, I highlight three sets of questions for policymakers on the Bank’s Financial Policy Committee ahead of their July FSR.

My questions are focused in three separate areas:

  • Implications of the rise in interest rates for deleveraging and default risk;
  • Lessons from the March banking turmoil for the effectiveness of bank resolution frameworks and implications for bank capital requirements;
  • The recently announced System-Wide Exploratory Scenario.
Photo by Anne Nygård on Unsplash

Helen Thomas

14 June 2023

The most significant intervention in financial markets during the pandemic panic of 2020 came on March 23rd when the Federal Reserve announced it would buy ETFs. Although it was only one measure buried deep amongst the alphabet soup of asset purchases and loan facilities, it deserves wider attention for arresting the vicious circle of financial instability that had taken hold.

"Silicon Valley Bank" by Alpha Photo is licensed under CC BY-NC 2.0

Professor David Aikman, Coskun Tarkocin

2 June 2023

On 10 March, the US authorities closed Silicon Valley Bank (SVB) following massive deposit outflows from the bank the preceding day.  The days and weeks that followed saw further bank failures, of Signature Bank (12 March) and First Republic (1 May).  The proximate factors that led to these bank collapses have been discussed at length, and include material unhedged exposures to interest rate risk and rapid growth in uninsured deposits.[1]

Decisions To Make by mattjeacock, Getty Images Signature

Dr Richard Barwell

17 April 2023

There are not one, nor two, but three policy committees at the Bank of England. Their names describe their respective responsibilities: the Monetary Policy Committee (MPC), the Financial Policy Committee (FPC) and the Prudential Regulation Committee (PRC). One could be forgiven for assuming that these committees would share a common template when it comes to their composition and decision-making process – three committees cut from the same cloth. But they are not.

White and Gray Control Panel by Şahin Sezer Dinçer / Pexels

Professor David Aikman and Dr Richard Barwell

23 March 2023

It has been argued that the institutional set-up for monetary and macroprudential policy in the UK is in need of reform (see Turner (2022) and Allen (2022)).

Stock market and finance economy against the background of Shanghai by Shaxiaozi, Getty Images Signature

Professor Gulcin Ozkan

7 March 2023

The sharp reversal in the monetary policy stance in major advanced economies since the end of 2021 has had ripples far beyond their national borders.

Balance sheet by Pascal Skwara, Getty Images

Charlie Bean

6 February 2023

The great financial crisis of 2007-8 not only resulted in a recasting and tightening of the regulation of financial intermediaries, but also the introduction of a new arrow into the policymakers’ quiver in the form of macroprudential policies.

One Blue Light, Getty Images Signature

Dr Philip Turner

24 October 2022

The world economy is at a turning point. After almost 15 years of low inflation and near-zero short-term rates, we are in the midst of a new inflationary phase of higher interest rates. No one knows how long this phase will last.

British Pound Sterling by Suman Bhaumik, Getty Images

Dan Mikulskis
19 October 2022

When I first read Toby Nangle’s July FT piece “the coming collateral call for UK pension funds” I kind of thought, well yeah, but … this is what is happening right now, or has already happened and in a pretty orderly way. It seemed a statement of what was happening at the time, as back then many LDI programs went through the orderly process of refreshing collateral as interest rates had risen.

Stock photo of the Bank of England

Professor David Aikman and Dr Richard Barwell
11 October 2022

The Bank of England’s “temporary and targeted financial stability operation” proved highly effective at stabilising the gilt market. The Bank managed to break the feedback loop that had emerged, whereby margin calls triggered sales of gilts which in turn further depressed prices, and its intervention catalysed a rapid recovery in gilt prices.

New York Skyline by Lukas Kloeppel

Professor Richard Berner 
6 October 2022

It’s been more than seven years since Paul Tucker warned of financial stability risks from outside the banking system. And it’s been more than a year since Don Kohn similarly spoke at Jackson Hole about unfinished business in financial stability policy and regulation, especially in nonbank finance, referring to the Task Force Report he co-chaired.

Mendenhall Glacier, Juneau, United States by Matt Artz

Professor David Aikman and Dr Richard Barwell
21 September 2022

Climate change represents a clear and present danger to the health and wellbeing of current and future generations. It is only natural that every unelected official who sets economic policy would reflect on what they can do to help tackle this crisis, within the remit that they have been given.

Stock photo of the Bank of England

Dimitri G. Demekas
1 June 2022

In the aftermath of the global financial crisis, countries established a new ‘macroprudential’ policy framework explicitly aimed at safeguarding the stability of the financial system as a whole. In parallel, they overhauled their institutional architecture to accommodate the new framework. Although the changes to the architecture differed from country to country, in most cases central banks were given additional powers.


Professor Michael Schillig
17 May 2022

Ever since the Global Financial Crisis tackling the ‘too-big-to-fail’ problem without having to rely on taxpayer-funded bailouts has been a regulatory priority. Consequently, complex resolution frameworks have been installed in all major financial jurisdictions. The experience over the last decade has shown, however, that even a sound resolution regime cannot prevent bailouts when faced with firm failure of potentially systemic proportions.

Exterior of The Federal Reserve in USA. Big white building with colomns and the US Flag

Richard Barwell
05 April 2022

Large scale asset purchase programmes by central banks have become a familiar part of the landscape in financial markets. There is a lot of attention on what assets central banks plan to buy and how much money they plan to invest, but rather less on the specific reasons why. Central banks can buy assets to pursue financial stability as well as monetary stability goals, but it would appear that many if not most market participants…

Donald Kohn
14 March 2022

In a recent letter to the Treasury Select Committee, David Aikman made a number of thoughtful suggestions for improving the transparency of the FPC. From my perspective as a former member of the FPC, I completely agree with his objective and with several of his specific suggestions, but I also see caveats around some of them. One of the ones I cannot endorse is to publish transcripts of FPC meetings after 8 years.

Improving the accountability of the Financial Policy Committee

David Aikman
7 March 2022

This article publishes the annex to a letter sent to the Treasury Select Committee from David Aikman on the topic of FPC accountability and specifically how to quantify its financial stability objective. The goal of financial stability policy is invariably expressed in imprecise, nebulous terms, affording significant discretion to policymakers in how it should be translated into operational targets and ultimately into policy decisions.

House of Cards - Macroprudential Matters

Vítor Constâncio
1 March 2022

Several regulatory reforms stemming from the lessons of the 2008/9 Financial Crisis are still quite incomplete. That is particularly true about some instruments and activities of the so-called shadow banking sector. We saw that clearly in the severe liquidity problems in US Treasuries in March 2020. Usually, regulatory shortcomings become visible when stressful situations or crises emerge. Due to inflation, higher bond yields, FED tightening, and now the Russian invasion of…

Dr Alan Brener
25 January 2022

This article briefly considers the issues of macroprudential political legitimacy and the concept of the ‘turbulent frontier’. It goes on to consider how conduct of business regulation may mitigate some of these risks. Macroprudential policymakers are very conscious of the political legitimacy issue. Consequently, there is a risk that they may shy-away from employing macroprudential tools that may be seen as being too effective.

Exterior of Bank of England Reactions to the Bank of England’s December 2021 Financial Stability Report Macroprudential Matters

Richard Barwell and David Aikman
7 January 2022

Forensic scrutiny of the decisions taken by policymakers and the analysis that underpins them is an essential component of a healthy public policy regime, particularly one where power has been delegated from elected politicians to unelected officials. One of our chief concerns with the evolving macroprudential policy regime is that there is so little scrutiny of what is and what is not being said or done by policymakers.

Professor Riccardo Rebonato
17 December 2021

In the wake of the 2008-2009 financial crisis, financial institutions in general, and banks in particular, have faced a heightened regulatory scrutiny, a more muscular and intrusive style of supervision, and substantially more onerous capital and liquidity requirements. Some institutional changes, such as the enhanced role given to Central Clearing Counterparties, have revolutionized the environment in which important…

bank of england - macroprudential matters - financial policy committee (fpc)

Professor David Aikman
09 December 2021

We take stock of the cumulative effect of the various changes that have been made over time to the Financial Policy Committee (FPC)’s mandate via the Chancellor of the Exchequer’s annual “remit and recommendations” letter.  Our focus is on what impact has there been on the relative balance between promoting resilience and stability versus pursuing other government policy objectives, including promoting financial innovation…

Dame Kate Barker
22 November 2021

The Financial Policy Committee views the housing market through the particular lens of financial stability, as its remit largely dictates. There is a risk that the consequent policy stance will increasingly rub up against other Government policies (such as increasing the rate of home-ownership, or some interpretations of the levelling-up agenda). Many believe, though this is not uncontested, that the UK has a housing crisis.

Black Cab Taxi - Macroprudential Matters - Bank Capital Problems

An exchange between Charles Goodhart, Jeremy Bulow and Paul Klemperer.

12 November 2021

There has been a recent, important, paper by Bulow and Klemperer, entitled ‘Misdiagnosing Bank Capital Problems’.  They argue (p.1) that “the regulatory system’s emphasis has been on more insurance rather than more capital”. Consequently, they note (p.3) that “Regulatory forbearance creates especially low capital requirements for the toxic assets that are the riskiest, encouraging insured banks to retain loans that would otherwise be sold and then, for ‘debt overhang’ reasons reject good new loans”.

Professor Rosa M. Lastra
25 October 2021

The 2007-09 global financial crisis challenged many pre-existing conceptions about systemic risk, including the ‘composition fallacy’ which assumed that if individual entities were robust and subject to adequate micro-prudential supervision, then the whole system would be resilient. This assumption proved to be misguided. Thus, in response to the need to monitor and control systemic risk, the ‛macroprudential’ approach has become one of the defining features of the post-crisis financial reform agenda (together with new resolution tools…

Donald Kohn
15 October 2021

Implementing robust macroprudential policy—addressing threats to financial stability beyond those that were the focus of safety and soundness on an institution-by-institution basis or of investor protection market-by-market—was a constructive outcome of the legislative and policy response to the global financial crisis of 2008-09. In the US, the Dodd-Frank Act of 2010 strengthened the hand of the Federal Reserve as it addressed the systemic risks in banks & bank holding companies, including those emanating from institutions that were “too big” or “too systemic” to fail.

Richard Barwell
27 September 2021

There is a problem with macroprudential policy. The two core building blocks of an economic policy regime – a model of the system and a loss function to guide policy decisions – are missing.  Without a reliable model of the system, policymakers cannot forecast with any accuracy how that system will behave in the future or how it will respond to policy interventions. Without a loss function, policymakers are unable to evaluate outcomes and hence whether they are making the situation better or worse.

Sir Paul Tucker
13 September 2021

Macroprudential policy is (supposedly) the dynamic component of financial stability policy. Leading researchers recently described its purpose as being to “moderate the procyclicality of the financial system and thereby secure the resilience and stability of the financial system as a whole.”
There is a good deal to be said about that, including whether any country with an international finance centre is operating a policy anything like it (no) and whether they should if they could.