06.22.2018

Mark Carney: New Economy, New Finance, New Bank

Speech given by Mark Carney, Governor of the Bank of England, The Mansion House, 21 June 2018

I. Introduction

In recent years, this annual Mansion House dinner has been rightly cancelled in the wake of national tragedies. Two years ago, we were united in defiance after an attack on our democracy, and more profoundly in sorrow and admiration for Jo Cox MP, a remarkable woman who had dedicated her life to helping others. Last year, we were united in grief following the terrible fire at Grenfell Tower which claimed so many lives and scarred so many more. And we were united in determination that such a tragedy should never happen again.

Prior to this, the only other times Mansion House had not been held since its inception in 1877 were during the World Wars.

When the dinner resumed in 1920, the then Governor Montagu Norman emphasised the unity that the City needed in order to return to normal.

Norman’s particular unity was around “the policy” proposed by the Bank of England. He believed “the policy was the one and only policy which ultimately would place the City and the country again on that eminence which it occupied before the war”.

Such was his confidence that Norman mentioned only once, in passing, that “the policy” in question was to “attempt to regain the gold standard”, and he spent no time at all explaining what, apart from normalcy, would be achieved by it.

Of course, this return to past certainties would eventually plunge the country into deflation and a deep recession. The old policy was not suited to the new normal and the UK was forced to abandon it a few years later.

After all, what is normal when there are tectonic shifts?

This dinner may look traditional, but its attendees have always recognised that the most longstanding and revered tradition of the City is its ability to anticipate, adapt to and accelerate change for the common good.

That is why the UK’s financial system remains both a national asset and a global public good. Domestically, there are over 1 million financial services jobs, two-thirds outside London. Financial services run a trade surplus of 3% of GDP, while the rest of the economy runs a deficit almost twice as large.

Last year, the UK financial system channelled £300 billion in finance to UK businesses and helped 700,000 households to purchase homes. It provides pensions to 21 million people and insures the contents of 20 million homes. It contributed 11% of annual tax revenues or over £1¼ billion per week in 2016.

Internationally, the UK is the pre-eminent financial centre. It accounts for 40% of global foreign exchange volumes and trades in over-the-counter interest rate derivatives. More international banking activity is booked here than anywhere else. The UK hosts the world’s second largest asset management and fourth largest insurance industry. The City is Europe’s investment banker, and it is leading the internationalisation of green, Islamic, renminbi and rupee finance.

Being at the heart of the global financial system reinforces the ability of the rest of the UK economy, from manufacturing to the creative industries, to compete globally. And it broadens the investment opportunities and risk-adjusted returns for UK savers.

This evening, I want to set out some of the ways the UK financial system can continue to serve the UK and the world in the face of major structural changes.

The rest of the speech can be read here 

Source: Bank of England

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