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Paul Tucker’s Difficult Questions

Julian D. A. Wiseman

Abstract: Paul Tucker has asked some excellent questions, most of which are fiercely difficult. Surely the BoE could fund some academic research?


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On 23rd May 2011 Paul Tucker, the Bank of England’s Deputy Governor Financial Stability, gave a speech entitled Building resilient financial systems: macroprudential regimes and securities market regulation (full text). That speech concludes with a summarising list of questions that have hitherto received too little attention:

… I have posed questions about the perspective and responsibilities of Listing Authorities; whether the distinction between public and private market transactions is as relevant for financial stability as it is for some other public policy objectives; how securities regulators need to be alert to innovations outstripping their regimes; how to factor the importance of resilient liquidity into the debate about trading platforms; the importance of CCPs as system risk managers, collecting large-position data, and whether they should apply gross margining; the case for a Trade Repository for securities lending and collateral swaps; the need for securities regulators and accounting standard setters to relax about forward-looking provisions, and for banking supervisors to relax about publishing some regulatory returns; the need for reform of the regulatory regime for some types of shadow banking; and the need for a review of the regulatory and other incentives prompting long-term asset managers to target minimum nominal returns.

These are excellent questions, most of which are fiercely difficult. Surely the BoE could fund some academic research?

The Bank should state that it is willing to fund up to, say, £5 million in each of the next five years, and seek proposals. To avoid political pressure to give everybody a morsel of jam, the Bank should state that the money is to be split between not more than four institutions. Proposals should indicate, amongst other things, how the money will enable the research institution to become a cluster of expertise in regulatory economics, with enough credibility and scale to become self-perpetuating.

Perhaps the Bank would not receive any proposals worthy of funding—a small loss of time for middle management. But perhaps the Bank would. Hiring a student at a University is likely to be much cheaper than paying a newly-minted PhD to come to Threadneedle Street. This funding might well be excellent value for the Bank and for the taxpayer.

— Julian D. A. Wiseman
25th May 2011

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