In his recent speech at Mansion House, Mr Carney addressed what he saw as an emerging ‘new economy’, that would be driven by a ‘new finance’. He outlined measures taken by the Bank of England to enable the digital economy, ensure the resilience of the financial system and support the UK’s transition to a carbon-neutral economy. With respect to this, he announced the publication of recommendations made by Huw van Steenis on the future of the UK’s financial system, including how the Bank could support innovation while promoting resilience, and the Bank’s response to these recommendations.
To enable this ‘new economy’, the Bank endorsed the Payments Strategy Review and has embarked on a rebuild of the RTGS system. This rebuild includes opening up access to the Bank’s payment services to non-bank PSPs, API access to users to read and write payments data, the implementation of a system to tag each payment with information in a globally standardised format and a revised supervisory regime for RTGS settlement account applications. These actions are expected to streamline the payment system and accommodate the advancements in technology.
Mr Carney also announced the Bank’s plans to consult on opening access to its balance sheet to new payment providers to improve the transmission of monetary policy and increase competition, as well as the potential use of the international stablecoin ‘Libra’, backed by reserve assets in a basket of currencies including sterling, to promote financial inclusion.
The Bank will also support more lending to SMEs through an open platform, implementing the recommendations from Professor Jason Furman’s Digital Competition Panel report on how to extract value from data and promote competition. Although the Bank will not build this platform, it will help in its development through the use of a Legal Entity Identifier (LEI) to tag payments on the RTGS system and will submit a response on how to develop an open platform for competitive SME finance to the Smart Data Review.
The Bank will also seek to strengthen the resilience of the systems, through the use of general purpose technologies such as Cloud and AI. In this regard, the PRA will issue a Supervisory Statement in the autumn to set out its supervisory approach. Also, in conjunction with the FCA, the Bank will hold a forum to discuss the results of a survey conducted on the use of AI in finance and determine an appropriate supervisory approach.
Mr Carney also announced a review to be conducted in consultation with banks, insurers and financial market infrastructures, to explore the transformation of hosting and use of regulatory data over the next decade. The Bank will also collaborate with firms and the tech sector to identify ways to improve on how it interprets information, using AI and ML.
In its drive to support the transition to a carbon-neutral economy, the Bank will adopt the TFCD recommendations and hopes to reduce its carbon footprint by almost two thirds by 2030. Furthermore, the FPC and PRC will stress test the UK financial system to assess its resilience against different climate pathways.
It is expected that by taking these actions, the Bank can enable the ‘new economy’, encourage greater competition and strengthen the resilience of the financial system.