Welcome to the Treasury Select Committee on Wednesday 15 April 2026. We are here today for a pre-commencement hearing on the appointment of the deputy governor for prudential regulation at the Bank of England. The candidate in front of us is Katharine Braddick. I should be clear that we have no veto over Ms Braddick’s appointment, but we are able to raise positive issues, issues of any concern or comments we may want to make about her appointment. First, thank you very much, Ms Braddick, for answering our questionnaire and for your CV, both of which are being published as we speak. I want to pick up on your background at Barclays bank, where you were a senior adviser to the group CEO and chairman on policy, relationship management and execution in relation to all Governments and regulators within the group’s footprint, which is quite a broad job. You have to jump from that position to this gatekeeper position, in effect. Are there any areas of Barclays policy that you personally disagree with on financial regulation and reform in the UK?

The first thing I want to say is that the Barclays position was the Barclays position, not the Katharine Braddick position. Barclays will make its own case; it has done so in the past, and it will do so again. When I was at Barclays, my role was to help the company to establish where its areas of interest were, where it wanted to engage with policymakers and regulators, and to articulate that case as clearly as possible, which I did to the best of my abilities, but my opinions are my opinions and the Barclays position is the Barclays position.

Okay. The chair of court has written to us about the management of conflicts of interest related to that previous position to make sure that you are financially separate. Have you been recused from any supervisory or enforcement decisions, and how are you going to handle any of that conflict?

I have the letter that the chairman wrote to you at the time of my appointment. One of the things that I want the Committee to be reassured about is that when those arrangements were put in place, both for the recusal and for all the financial arrangements, I was not part of that discussion at all. It was between the two institutions, and I was informed of the outcome afterwards. It is very important for me personally, as well as for the institution, that there are no conflicts, but critically that there are seen to be no conflicts. I was pleased to see the position in the letter when it was disclosed to me about being recused from decision making on Barclays for the first six months. That follows, of course, the period since my resignation from Barclays, which was at the end of February, so from the end of February until the end of that recusal, I will have no direct contact with Barclays policymaking or supervision at all, which is very important for Barclays and certainly for me. I do not know whether that answers your question.

Yes, it does. Obviously, you may well have made friends and colleagues at Barclays. Was there any attempt, before you left or since, to talk to you about issues that might be relevant?

No.

So no one in Barclays has made that contact—thank you. You were also at the Treasury for several years. How are you going to make sure that you manage perceived conflicts of interest there, given that you were a Treasury woman working on regulation and now you are a Bank woman? How are you going to handle that?

Before I was a Treasury woman, I was a Bank woman, and before I was a Bank woman, I was a Financial Services Authority woman. It has been a great privilege of my career to operate among these institutions. One of the things I can bring to this role is an insight into the role of those institutions and the way they approach these questions. Each of these institutions has its own accountability to Parliament for a role. When you need to engage on issues where you agree to some extent, or perhaps not at all, the question is then: what is your accountability to Parliament, and what is your responsibility? It is important to have personal relationships, because it can be helpful when things are difficult, but this is fundamentally a question about your legal accountability—it always has been. When I have encountered those tensions in any of these roles, that is what has got us through.

Are there any areas of recent financial policy from the Treasury that cause you concern in your new role?

No.

So there is nothing in particular that you want to look at. The Chancellor talked in her Mansion House speech about regulation being “a boot on the neck of businesses”. Do you agree with that language, or the sentiment?

This sounds like I am about to give you an evasive answer, but I want to set out how I think about the question you are asking. When I started my career in prudential regulation, when I was at the Bank of England, the economic challenge we faced was that the sector had placed enormous stress on the economy through the financial crisis, and the sector’s weakness was the way in which it was an economic threat to the UK’s broader economic interest. That continues to be the case: without financial stability, the financial services sector cannot contribute to the UK’s economy. What the Chancellor is drawing attention to—she is not alone; this is a factor in the political and policy debate around financial services regulation in every major developed economy—is the relationship between regulation and the sector’s ability to do its job for the economy, through allocation of capital, spreading of risk and maturity transformation, as well as its contribution through productivity. There is now an expansion in the range of economic goals that regulators need to address, and I think that is what the Chancellor was drawing attention to. That is why there is now a secondary objective for competitiveness and growth, and the Committee will probably be asking me a lot of questions about that in the course of my term.

You said that you were not giving an evasive answer—I am not suggesting you were—but in simple terms, is that language you would use?

I would not use that language, and I do not think that regulators typically use that language.

Have you had any suggestion from Treasury officials about how you should carry out this role?

Absolutely not.

Have you had any contact with the Chancellor about how she would like you to do this role?

No.

So you have not spoken to her at all since your appointment.

No.

Your role is very important, Ms Braddick; 85% of household lending comes from the banks, and half of corporate lending in the UK, so the decisions you make will be really important. There was an article a couple of weeks ago by David Postings, which I am sure you have read, and he pointed out that some of the decisions on the ratios and competitiveness of UK banks need looking at. Could you describe, in simple terms, what you think your challenge is at this point, and what you will do differently from your predecessor?

The challenge is a real one: to protect the very considerable achievement of the restoration of resilience in the banking sector, while considering the extent to which the regime is interacting with that ability to serve the economy, which I just discussed. It is a challenge because it is complex, and it is actually an area of public policy that is, relatively speaking, less developed in how you might assess it and evidence that relationship. It is a challenge that I see regulators facing in Europe and the US, as well as here in the UK. The challenge to articulate and be accountable for this is real and serious, and I do not think it is going to go anywhere. It is a challenge that the PRA and the FPC are addressing seriously, and the publication of the material in early December by the FPC, as well as the PRA’s work on the prudential regime alongside it, is very important. It is an important signal, as well as being a very important piece of intellectual and technical work. The second part of your question was about what I would do differently from my predecessor. I think that both Sam and Sarah, who is the deputy governor for financial stability, have actually engaged in this with seriousness and intellectual rigour, and I fully intend to continue to do that. As this area of policy becomes, if you like, more populated and more clearly articulated, we will be held to account for it in a different, a more detailed and even, conceivably, a more demanding way. My ambition is that among UK regulators, and indeed among international regulators, the PRA is seen as a thought leader for how we discuss this area of delivery, in the same way as I think that the PRA is seen as a leader for its execution on financial stability.

May I probe a little more? The capital held by the top UK banks, I think you would acknowledge, significantly exceeds the losses incurred in the financial crisis, and it is enough to absorb the losses implied by the latest Bank of England stress test—I think three times over. Does that not imply room for bolder decisions on how the banks are regulated, while retaining the importance of the principles of the post-global financial crisis resolutions?

The first thing I would say is that I know the FPC and the PRA have in-flight policy work on this, and that that will conclude and report before, or just about the time I take up my appointment. I am not sighted on that, and I do not know where they are on the thinking, so I do not want to get drawn on where that might land or what I might think about it, because I am not well informed enough. I think that these are important questions, and not just because of an abstract percentage number, although that is important—it is an important way of understanding, to some extent, how regimes stack up against each other—but because of, more concretely, what difference it makes to the ability of banks to grow, invest in themselves, attract investment, compete internationally, and deliver for corporates and households here in the UK. That is not a macro question; that is a detailed technical question, which is to some extent idiosyncratic to particular business lines and banks. As we get more into this and as more evidence is gathered—as I left Barclays, the PRA was involved in a process of engaging with all the banks on this in more detail—I think that this kind of debate will become more evidence driven and more concrete in understanding exactly how the operation not just of the rules, but of the supervision of the regime, intersects with the availability and pricing of the services.

Do you think that the right work is under way in the institution that you are about to rejoin, in essence, to examine whether the PRA supports the Government’s growth and competitiveness agenda? Are you going to do anything new on the assessment of the capital rules vis-à-vis the UK and the US in particular? That is the bottom line, isn’t it? People say that the UK is well regulated compared with other countries, but it is how we compete with the US. What do you think about that issue?

I will start with that part. This debate has moved on even in recent weeks, because the US has published its proposals for what they describe as a Basel endgame. There are several useful and interesting things about that. First, in approaching that piece of work, Miki Bowman looked at a number of components of their regime, which are actually not directly comparable with ours—the G-SIB surcharge and the SLR are components of the US regime that are not analogous to anything that operates in the UK—so if we were to look at a rule-by-rule comparison, we would not necessarily carry over lessons from it. As I understand what Miki is going about in the US, she is also looking at their approach to supervision. Yesterday, the ECB published some more content on its view of reform, competitiveness and growth in the EU, and I was interested to see that the ECB also talked about the approach to supervision and not just to the rules. There are things to be learned from that. In both cases, the structure and the nature of supervision in the Fed and the ECB are quite different from what it is for the PRA, which I know now, having been supervised by all three, but it is interesting to see where those regulators are looking in their own regimes to confront the same challenge that we are looking at here, which is about competitiveness and growth. There was a period when there was a public question about whether the US was going to complete Basel endgame at all, and that is clearly now settled. I think that is positive. You are right that you can do a sort of rule-by-rule comparison, but if you are in the industry you take a step back and still think, “How can I compete?” That brings us back to the question of the role of regulation in enabling and directing that ability to compete. It is very rare for regulatory treatment to be the thing that makes the decisive difference. As regulators, we need to be able to articulate clearly and credibly the extent to which it makes a difference where it does, and to engage in a debate about whether the balance is being struck in the right place. Sorry, I know you have a time constraint—

No, that is fine.

I will just complete the answer to your question.

Please do.

You asked whether the PRA is looking at the right things, and whether I would do anything different. In my understanding of where the PRA is looking in the course of its current policy process, it is looking in the obvious and right places: the leverage ratio and various potentially overlapping treatments of domestic exposures. All that is good sense. I should say that, as I understand it, that is not the only work that the PRA has done around competitiveness and growth. It has done a lot of work around data disclosures, as those are potentially expensive and bureaucratic for firms. The PRA has been looking at start-up and scale-up for some time, but also at AI and new models for the deployment of AI. All those are important areas for the future strength of the sector.

My final question is on the secondary objectives: stability is No. 1, but there are also competition and global competitiveness. I do not think that you say so much about competition in your application. Will you tell us about how you see the institution and what you will do to address those two elements of the secondary objectives?

That is fair; I reflected on the same thing after I sent in the questionnaire. I know that the PRA has done a lot of work and has a strong record on new bank and new insurer authorisations. That is an important part of competition. It is fully integrated into the way that regulators in the UK think about their task—they think about a level playing field within and between different components of the sector. That is absolutely essential to competition. To the extent to which it is something that we are asked about a lot or that, when I get into the institution, as I discuss it and understand it better, I feel that we need to have to a more developed sense of how we talk about competition per se, I am definitely open to addressing that as part of what we deliver. Most of what I have been asked and the debate that has been had around the PRA’s role was very much about competitiveness and growth. That is probably why the bias in my questionnaire is as it is, but I think that you are right to surface the competition part. It is something that I definitely will have to think about more.

In the last 10 years we have done a great job of having more banks.

Yes. But what is the effect for competition?

Few of them really compete with the big banks today. We have not really cracked that.

I do not know what the big banks have said to you when they have come in to talk about that.

You know what the big banks thought till quite recently.

My sense of the sector, from when I was in policy work and from when I was in it, was that big banks definitely feel competitive pressure from start-up banks—definitely. They compete hard on not just cost but quality of offer. That is a commercial reality that I know the banks are alive to.

Thank you very much.

Sam Woods told us that the objectives of the PRA are quite distinct and in some instances will pull in different directions, and that the separate status of the chief executive helps to protect the PRA. You have a role as a deputy governor of the Bank but also chief executive of the PRA. Do you see those roles ever coming into tension?

Certainly you can see them coming into tension. Having been at the Bank as the current structure was set up, with the creation of the FPC and the PRA, that is something that was thought deeply about in Treasury, in Parliament and in the legislation, when the structures of the Bank were set up. You can hypothetically see scenarios in which those tensions arise, and that is why I think the structure of committees at the Bank of England is so important. The roles of the deputy governors and the clarity of their circumscription are important, but those powers and roles are operated within a governance structure that permits and requires independent challenge and scrutiny through the PRA, the FPC and the Monetary Policy Committee. That is a really important way to make sure that these roles are being discharged in a coherent way, and that where tensions arise they are resolved transparently and on an evidence basis.

Maintaining independence also depends, to a large extent, on people’s personal behaviours, whatever the statute says—I say that as a recovering lawyer. From your own part, how would you see yourself dealing with maintaining that independence?

I have had experience, at a number of different points of my career, in having to mark out particular institutional territory that I was having to articulate, defend and push forward in quite complicated contexts. Some of that was in negotiation, and some of that was in the institutional architecture within the UK. My experience of doing it is that you have to make and remake with yourself, and have very clear in your own mind, with the support of your team, exactly what your objectives are—exactly what matters. You need to understand where others are coming from, and you need to constantly be testing yourself against where your own accountabilities lie. One of the other benefits of being in this role is the need to come in front of this Committee regularly and explain how I have done that. That is, if I may say so, quite a powerful discipline for how you think about handling those moments.

So if you came in front of this Committee, and you felt over the last six months that you had been put under inappropriate pressure that had not been resolved appropriately, you would be quite comfortable explaining that to the Committee and expressing your concerns.

My hope would be that, if my concern was that serious, by the time I came in front of the Committee it would have been addressed and dealt with.

And if we asked you the question, you would tell us that?

Yes. I always want to give a direct answer to a direct question.

And Jim Dickson is going to try!

On the present economic turbulence created by the Iran war and what you had said about it when we asked you about it in the questionnaire, you said that depending on how various vulnerabilities interact, there could be a threat to financial stability.

Yes.

Do you see the situation in the middle east and Iran as the primary threat to financial stability at the moment? Are there others of a similar magnitude that you would see, or is it the main one?

It is quite difficult to quantify the threats. Stress and, indeed, crisis arise when—without wishing to be glib about it—two things go wrong at once. What you can see is that there are a series of vulnerabilities that we are confronting at the moment, and it is the potential interaction of those—even where they may seem to be separate—that can create stress, which is always idiosyncratic. The FPC’s publication at the end of last month set out very clearly and comprehensively the pressures arising from the current situation in the middle east. That situation evolves day by day, but that analysis of the risks continues to be relevant and accurate. There are others; I know the Governor’s reported remarks in the press today make a connection—you can be looking at Iran, but something can be happening on AI. That is of course quite right. It is about a number of things happening at once and/or interacting.

Do you think there are any further developments that you see potentially crystallising that could push us to a situation where we have what might be termed a “financial crisis”? Do you see us moving in that direction?

I don’t think I can bring more powerful insight than the FPC has in the way it has unpacked both the length of the list of vulnerabilities and the potential for them to interact. I think that continues to be quite a demanding risk environment in which to be executing this role.

Obviously, they decided not to change the capital buffers when they last thought about it. Do you consider that the right decision?

That is the right decision.

Are there circumstances in which they will need to look at that again?

The FPC revisits these questions regularly. In view of its risk analysis, that is the right thing to do. You can see situations in which the calculus may shift, but I think that was the right decision for the time.

Are you comfortable with the way the insurance market is currently working? The London insurance market carries the majority of the risk for marine insurance. That is obviously a huge issue at the moment with the strait of Hormuz. Do you think there is a role for the PRA in maintaining stability in that market?

I think I have said it several times, but I will reiterate. I have not yet been briefed on what the PRA is doing. I am sure that the supervisors are very attentive to and in contact with the London market. My understanding, simply from being outside the situation, is that the threat is more from the security situation than from anything arising within the regulatory environment, but I am sure there will be close and continuous contact with the supervisors.

Can we turn to the issue of AI-related asset valuations? Could you tell us what you think about that? You cannot sit here and predict what is going to happen, but people are concerned about companies that are worth more than they really should be, and the implications of a swift, unexpected correction. How do you see that issue and how would we deal with it? What are the most likely scenarios you see when you look at this?

Simply across the valuation part of the AI question—there are many more aspects to it—there is a question of the valuation of AI companies but also a question of the effect of AI on the valuation of other companies. The Governor has spoken about that publicly and I don’t disagree with his position. You can see that there is a world in which that correction is sharp, and that that flows through to markets, and it flows through to markets in a way that sees a stress reaction. Anybody who could speculate about the outcome of that correction would be doing very well. I think it is an adjustment that can be prepared for, but its timing and scale cannot be predicted. I am sorry not to be able to say more.

I think that is reasonable. Can I ask you about the dissonance that may exist between the regulators in the US and UK? You have represented the UK regulators and banking in the international forum. Obviously, many people would observe what is going on in politics. Could you say something about what that means for conversations and dialogues that you anticipate having at the moment with your counterparts in the US? Because we do have very strong relationships.

We do. Historically, throughout my career, the UK has had very strong relationships with US counterparts. That has certainly always been my experience. And, indeed, with EU counterparts and elsewhere. For the purposes of this question, I would say a number of things. As I have already indicated, I think Miki Bowman’s approach to her equivalent role in the US is idiosyncratic to her situation but the challenge that she is confronting is a similar challenge. I am interested in how she is approaching it. I am interested, for example, in the fact that she had a conference towards the end of last year or the beginning of this year with industry about the rules. I thought that was a very interesting and instructive way to go around the policy task, which is abstract from the policy positions they land in. The international standard-setting framework is really important here, and the rule-setting framework is important, because in the wake of the financial crisis, which is when I was first engaged with those international standard setters, the focus was very much on ensuring that we had rules that were, as far as possible, equivalent to each other. That massive wave of regulatory reform is largely complete, and we are in phases 2, 3 and 4 of it. The bit of the task of those standard setters that continues and is really important is the supervisory engagement. It is supervisors getting to know each other, understanding approaches and challenges in each jurisdiction, understanding the specificities of how you deliver supervision in each jurisdiction. The reason why I say that is important is that, from my experience, the ability of regulators to handle stress scenarios effectively in the moment frequently devolves to the quality of the relationship between the individuals. If people know each other and understand each other’s regimes and political and policy contexts, that supports the ability to make decisions and share information fast in difficult situations. I don’t see that in any way being threatened or undermined by our relationship with the US at the current time; my sense is that that is very strong, and absolutely my intention would be to continue to operate in that way.

Is it fair to characterise what you just said as, regardless of what happens with politicians in terms of whether they move closer to the EU or the US, there is an underlying depth of interwiring between supervisors across different jurisdictions, which serves us well in all circumstances?

I think I would nearly say that. I would say that we must serve the public policy goals of our Governments, and that is what we are accountable for. The extent to which our Governments want to direct us to solve particular problems or operate in particular ways is what we should focus on. That is what I should be accountable to this Committee for, and it is what Treasury Ministers will be expecting me to address. But there is a commonality of challenge, and there is a need for supervisors to have the ability to co-operate in difficult circumstances. That must be very strong and must be deliberately cultivated.

For the record, does that relationship exist at a similarly strong level vis-à-vis our neighbours in the continent of Europe?

Obviously, because I have been out in the commercial environment, I have not been directly involved in those conversations, but my sense is that a conversation has continued all the time, and that again, there is plenty to talk about in terms of how we confront some of the challenges that you have been asking me and Sam about. My perception is that that continues and is effective.

Just to probe you gently on that, the direction of the Prime Minister is that he believes that there is room for a closer relationship. What would you say that would or could look like from your point of view as the deputy governor and head of the PRA?

For the Government, there is the question of the trading relationship, and that is not for the PRA. For the PRA, there is the question of information sharing and engagement on policymaking. To some extent, that is informed by the way the Government want to manage the relationship, but a lot of the time it is pretty technical and it is to do with the ability to execute your job better. I think it makes some difference, but I think the conversation continues regardless.

How concerned are you, Ms Braddick, about the risks coming from private lending?

I am, as we all are, very aware of the almost daily public debate on this issue here. The debate going on in our public discourse is very heavily informed by events and developments in the US. Private credit has a different scale there. It intersects differently with retail and with insurance in different ways in the United States. That is not to be complacent. It has been drawn out in FPC reports. What happens in the US can affect financial stability in the UK. The system-wide exploratory scenario work that the PRA is doing is very important to really get underneath where the risks are and how they could play out. I fully—I would anticipate that supervisors are in contact with banks and insurers here to understand, in real time, how they are seeing the dynamics play through in terms of credit quality. I don’t know, but I anticipate that that is the case.

If that is not the case, would that be something you would want to instigate?

Certainly. It remains on the list of vulnerabilities that could interact with other vulnerabilities that we see.

I am just going to bring in Mr Grady and then Mr Glen. It is a popular subject.

It is, I am afraid. We have had a number of witnesses speak to us and explain their sense that the SWES is really good, but we need much better visibility of what is going on in private markets on the supervisory and regulatory scale. That probably takes legislation and international agreement, like we had following the financial crisis with MiFID and EMIR and that package of legislation. Is it your sense as well that we need to dial it up a bit on the information gathering so that we understand better what is going on?

I am going to be slightly cautious because that is not currently within my regulatory remit. Private credit is outside the PRA’s regulatory remit, so it is not appropriate for me to comment where there are separate regulatory responsibilities. I have heard the same concern from industry, and from inside and outside the banking system, that it would be better to be able to see more about credit quality. I am sympathetic to that argument. Until I am in the role and see more clearly quite what is going on, I would not want to be drawn further than that. If there is concern about opacity, quality and underwriting standards, transparency is certainly the first place to look.

You say it is not in your remit, but you will be a member of the FPC.

I will be a member of the FPC.

So in that sense—

In that sense, yes, absolutely.

I want to probe around the impact that the regulation of banks has had on the development of private credit. As I understand it, you regulate banks in one way and it creates an incentive, or not, to find returns elsewhere. When it goes into that private credit situation, it is not within your oversight but, as you have just said, when there is not enough clarity over what they are doing, there can still have a systemic risk on the economy. So you can bring more activities into scope through changing the regulator, but arguably the horse has already bolted. Jamie Dimon and others are saying that you have got a reality that exists there. I am a bit uncertain about what the response is from the regulators when, in essence, the regime we have had over the last 12 to 14 years has arguably created that off-stage activity. What are we going to do?

Yes, and I think, at least partially intentionally, the restoration of resilience in the banking system took risk out of the banking system and into market-based finance. From the relatively narrow banking regulatory perspective, your task is to protect the banking system—to operate the boundary around the banking system where the risk gets transmitted back into it. That is currently where we are. I imagine supervisors are talking to banks about their credit quality and underwriting standards. Market-based finance is a highly heterogeneous sector. The FPC has been tracking risk in that sector in a variety of ways over a very long period. In a sense, this is an unanswerable question, to the extent that, to your point, the risk occurs in the system somewhere; the question for me in the PRA is: how do you keep the banking system safe from it? At the moment, that is to do with the operation of that boundary.

The strategic question is to what extent you can bring reasonable risk within the remit of the Bank’s oversight, for overall stability, without causing a reduction in risk taking and economic gain.

Yes. And where is the risk best located for the resilience of the overall system?

You seem to be saying there needs to be greater transparency than exists at the moment. Is that correct?

There is clearly an argument everywhere about the extent to which we might all need to know better what is going on in private credit. That is the right argument to be having—

Do you think that?

The reason why I am being slightly evasive is because—

You are!

Until I am on the FPC and running the PRA, it is not clear to me quite what is known, so I don’t know where my own comfort zone is. But transparency is absolutely the first place you start when you are trying to get your head around these risks.

You are laying down something for us to ask you about in a future session.

I don’t think this will be the last time we have this conversation.

We will wait till you are before us after you have had time to consider your position on that. So you have a top tip about what we will ask you next time.

I should put it on the record that I worked with Ms Braddick when I was Economic Secretary—

So did I.

And so did John. I want to pick up on something you mentioned in your questionnaire. You say that sovereign debt pressures are one of the main risks to UK financial stability. Obviously, today there was an auction of 10-year gilts that went for over 4.9%—the highest level for 20 years—so to what extent do you want to elaborate on those risks for the Committee’s benefit?

I do not have much to add beyond what I have put in the questionnaire because, again, this is an area where the FPC has done more detailed technical work that I have been able to do. In some cases, there has been a debate about gilts and the exposure of UK banks to gilts and where it appears in the leverage ratio. Therefore, the only thing that I would add—this is a question I was anticipating that you might ask around leverage—is whether gilts should be included in the leverage ratio. My view is that the bar for that is very high. I think Sam has made some public remarks about that as well, not least because of this picture around sovereign risk. Beyond that, I do not have much to add to what I put in my questionnaire.

Would it affect regulated firms mainly through the impact on their mortgage books, or do they hold substantial portions of gilts unhedged themselves?

It varies from firm to firm to some extent. There is also a picture for the insurance sector as well. It could play through in a variety of ways. To be frank, without access to the supervisory information it is a bit hard for me to give you better analysis than you would get from anywhere else at the moment.

Do you see the UK gilt market as being particularly risky at the moment? If you are paying that level of interest rate, debt in this country is obviously going to compound much faster unless we can get better nominal and real growth in the economy.

There is certainly a question around growth. There is a very vigorous debate right now about the effects of the situation in Iran, the shocks that might transmit to the economy and the extent to which they affect gilts—the extent to which they affect the UK and a few other economies more than others. That is to do with a much wider set of economic questions that are not really for me. Sorry.

I can see there is probably a limit to what you can tell us on that.

We will clock it all for when you come in front of us next time.

It has been widely reported that the Bank is going through a round of redundancies. Have you been told how that might affect the people who work for you at the PRA? Just to put it out there, my worry was that I read that the redundancies were very much a voluntary process. That tends to mean that you lose all your best and most experienced people. Do you have any concerns about the quality of the people in the team that you are inheriting?

I do not have concerns about the quality of my team. The PRA has a reputation as a very high calibre organisation, and it is therefore a privilege for me to go and work there.

Have you met with them yet?

I have not met with them as a team yet, but I know several of them from a number of my roles in the past. To answer your question on redundancies directly, I have been briefed on it but at a very high level, as is appropriate. Personal data and personal circumstances are involved. I know it is something that the Committee has asked about, and that is understandable. It is still for Sam and Andrew to talk to you about that because they are the ones who are writing the detail of it. My observation is that supervision and policymaking are human-driven activities. I am very interested in how we can use technology to do our work more efficiently—how we can use technology to do our work on risk analysis and risk identification and communicate that really well as quickly and as thoroughly as possible. However, it will always need really good people to make it work well. I do not think that is a different position to that of the current incumbent.

At this stage you cannot tell us if the redundancies have affected the skill mix or the quality or experience of that important human capital?

I do not have the information on any of those factors currently.

I want to pick up on some issues to do with Mansion House—or is it the Leeds reforms these days?—in terms of progress on all the various different reforms. The first question is on ringfencing. Where do you feel we have got to on ringfencing? You will be aware that when we had evidence from the banks, Barclays took a very different view on ringfencing reform from HSBC, Lloyds and NatWest. Where is your head on ringfencing in this new role?

My view on ringfencing is that that regime delivered a very important uplift to the UK’s financial resilience through addressing the risk of very complex banking groups. That was a very significant way in which that regime made the UK’s system safer. You know, but it is important that I make this clear, that this is Government policy. It is enacted by Parliament. It is for the Government to decide whether they want a ringfencing regime and how they want it to operate.

Would you recommend any movement to Government?

I read with a good deal of interest the Keith Skeoch review into ringfencing, which was comprehensive and very interesting. What I have observed is that the Government have established that they continue to want to ringfence, and they want that ringfence to be optimised for efficiency and in the light of lessons learned. It seems to me that that is what the PRA is doing. I do not have anything to add to that. It seems to me that that matter is settled for now.

Okay. You will not be agitating for change in that area. That is what I am hearing.

I will not be agitating.

Turning to a couple of the other reforms, I think the PRA has a role to play in the senior managers regime. Where do you see those reforms as having got to? Is that an area where you think more reform is needed?

That is one of the many issues with which I have some personal history. The PRA is making good progress in making that regime less bureaucratic and more risk focused within the requirements of the legislation. My understanding is that there is also an intent to address the legislation. As I understand it, the Treasury has the intention to look at the legislative requirements, and that provides a little more room to the PRA to do a second phase of reform. My personal history with the policy is that I was the director of policy at the PRA when we were devising that regime.

I took the legislation through.

The thing I understand much better now, having been in a commercial environment—others in the regulator may have understood this without having to do that, but it took me having to go through a bank to understand it—is that, when you put a regime like that inside a large, complex banking institution, risk management means that it probably becomes a more complex regime than I think I had envisaged it would be—let me own it—when I was thinking about the rules when I was at the PRA. Now, with the benefit of the experience I have, I can see that what the PRA is doing is a useful and productive thing to do, and my guess is that there could be more to be done if the opportunity arose.

By the PRA itself?

Yes.

We have had feedback from industry about how it can be quite slow and bureaucratic.

I am not being critical of what the PRA has done, because I think it has looked quite searchingly at what it is able to do within its requirements, but to the extent that the legislation shifted a bit, it could do some more. I do not want it to sound as though I am a denier for the senior managers regime. The other thing I have seen from being inside an institution is how it operates to ensure that there is very clear accountability and that risk is thought about very carefully, in a very personal way.

Where do you think things have got to on Solvency II? Is there still more that the PRA might be doing in terms of the changes to insurance capital requirements?

Solvency II is one of the areas of policy that has moved on a good deal since I last had direct professional contact with it; I think I may have referenced in my questionnaire the fact that I need to get back up the curve on live insurance issues when I join the PRA. As with the ringfencing regime, there is the opportunity to review Solvency UK in future. I do not think there is a massive, burning need to do so, but it is good discipline. Particularly given the very live conversation in the UK about infrastructure investment, and the role of insurers in that, it is positive that there is an opportunity, in a structured way, to get into the relationship between regulation, infrastructure investment and the ability of insurers to thrive. That is quite a big public policy question that persists around the sector.

Could I briefly turn to AI? You said in your response that “AI introduces new forms of model risk” such as the risk that “failures can be opaque”. I recognise that you are not fully up to speed on all of this. There seems to be a concern that AI is of great value, and we do not want to kill its application and value enhancement, but there is also a set of risks around things being overcome in ways that might not be appropriate from a regulatory point of view. Can you set out your instincts on this, so that when we come back to you in a few months’ time, we will know what issues you think we should be asking you about?

There are two really important and almost ostensibly completely opposing areas of challenge around AI. One is how to ensure that the UK harnesses it across the economy, but for these purposes, for the financial services sector, to make it highly productive, world leading and ensure that it delivers really effectively and is really resilient. AI offers opportunities for all of that here. There is a rightly a lot of challenge to authorities to make sure we are taking all those opportunities. As I have referenced, there is a question within it about how we use AI for supervision. Then there are all the ways in which it surfaces risk for the system, and we have talked about some of them. The Governor has been talking in Washington about others, because there has been a discussion about Mythos in the press this week. There is a question about defenders getting access first to the strengths and capabilities of AI, to ensure that they are used for the resilience of the system, rather than the opposite. Across all these dimensions in the, there is the question about whether it is beneficial or a threat. Is there a good enough understanding of how it is getting to where it is getting to? As the Governor has said, I think, that question does not get resolved; it is a rolling question that we will continue to have to engage with. My personal view is that we have to and will be expected to address equally the threat and the opportunity. The PRA at the moment is taking the approach that regulation should be technology-agnostic. I think that is sensible, and I have heard feedback from the industry that that is a sensible thing to do that supports the industry’s ability to be successful and manage its risk. Whether that continues to be the case, we will have to see; I am very open-minded on it.

Do you think there is a risk in terms of regulators’ knowledge and depth of understanding, given the pace of these incredibly innovative niches of technology, coding and thinking? How do you feel about the capacity to keep up with that?

There is that challenge across the whole economy. Across every institution I know that is engaging with this, the first challenge is, how do we stay up to speed fast enough? How do we make sure we have senior management and board-level people who understand the challenge and opportunity well enough to then hold the executive to account, and how do the executive hire the talent to make sure they are doing the best possible job?

In the FCA, you have engagement through digital sandboxes and so on, where you bring these innovators in, so that you can understand what they are doing. Is there something similar in the PRA?

The PRA is looking at sandboxing as well, as I understand it. The relationship between the PRA and the FCA is close on this, as it is on other issues. We talk a lot about AI, but there is a lot around technological advance in the financial services space on which there is very close collaboration and co-operation. The benefit is that we have an industry and a set of participants in the industry who are really keen to talk to regulators about it, because they want a well-regulated environment, and they want regulators to understand what they are doing. That is a tremendous asset for this challenge.

On co-operatives and mutuals, you are aware that the Government have a commitment to double the size of co-operatives and mutuals. The PRA has been very supportive up to now. The prudential policy director told us that it was important not only because it was a Government policy, but because they meet a need for people who are underserved by financial institutions. In what ways do you think that the PRA can maintain that focus? Will you, too, subscribe to that direction of travel?

I absolutely, wholeheartedly subscribe to that direction of travel. Early in my career, in fact, I was responsible for credit unions policy. Mutuals are a fascinating sector, and an incredibly diverse one. They serve a variety of communities in ways that are very important, and I think that the regulatory conversation with mutuals is potentially quite different from that with other firms, because the absence of shareholders means a different kind of conversation about what the institution is doing. To go right back to the beginning of our conversation and the Chair’s question about competition, I think that mutuals are also very important for competition in the sector, because through a different purpose they offer a different model for how services might be delivered. I have read with interest the work that the PRA and FCA have published on mutuals, which was constructive and helpful. I do not currently have anything to add to that, but I think that mutuals are an important part of our financial services sector. The regulators can do a lot to preserve, enhance and enable mutuals to fulfil their potential. That is how I would see my role.

Mr Woods talked about consolidation being an important part, potentially, to strengthen individual institutions, in particular for credit unions, for example, but also for other forms of mutuals. Do you have any thoughts on whether that is necessary in order to make sure that the sector can flourish?

I agree, because it would make those institutions more resilient to serve the communities that they serve. There are many reasons why mutuals are interesting and important to the UK and our economy, but one of them, as you have indicated, is that they serve communities that can otherwise be underserved. It is therefore critical that they are able to do that in a way that is effective, resilient and competitive. I think that the regulator can offer a lot of support, and can create an environment for them to thrive in, in that respect.

One request from the Building Societies Association was about regulation and whether the leverage ratio buffers were appropriate for their sector. Do you have a view on that at the moment?

If you do not mind, I will resist being drawn on that question until I am in role and have access to better technical information.

I think Mr Dickson is laying a marker there—lots of to-do points here. Before we finish, I want to ask about the questionnaire. Did you fill out the questionnaire yourself?

I did.

Before you submitted the questionnaire to us, did you share it with any other organisation or part of the Bank?

I shared it with the parliamentary affairs team at the Bank of England, for information. Would you like me to elaborate a little on what then occurred?

Did they have any comments on it?

Yes, they were able to give me some corrections of fact, and they offered me comments on some areas for clarity, some of which I took and some I did not.

Anything substantial in those comments?

No.

Thank you very much for your time. We will now have a private session to consider a report about your appointment to make our views known to the public and those who appointed you. If you want to sit outside for a moment, we should be reasonably brief, because we have a vote, and can probably come to tell you the news shortly. Thank you.