The post-crisis debate has generated many initiatives to reduce systemic risk: higher capital and liquidity ratios; restraints on bankers’ pay; and splitting banks. But these will not in themselves prevent another crisis. What is needed is a robust and continually active framework to ensure stability of the financial system.

While a global approach must play a part, policy implementation will need to remain at the national level. Such initiatives are evident in the US, Europe and elsewhere. And in the UK, defined responsibility for maintaining financial stability seems likely, and rightly, to be restored to the Bank of England.

The question is how best to carry out this duty. At the centre of the framework should be a body – call it a systemic policy committee (SPC) – with a mandate to prevent the build-up of systemic stress. 

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