The Treasury Committee today had pre-appointment hearings with
Jill May and Julia Black, new external members of the
Prudential Regulation Committee.
Committee chairman opened the first session
with Professor Jill May by asking how tolerant of failure of
firms overseen by the PRC should the committee be.
Ms May said sometimes firms must be allowed to fail, but they
must do so in an orderly fashion without impacting the public
purse (a sentiment echoed later by Julia Black).
Regarding operational resilience, Jill May said a number of the
bigger banks had legacy IT infrastructures which might be fragile
and thus vulnerable to operational problems. The PRA wished to
engage with firms over this. The joint discussion paper suggested
firms should have a good understanding of which services were
critical.
Operational resilience was critical and should be the primary
objective after Brexit, which was the PRA’s main focus.
asked about Jill May’s
other commitments. She gave an assurance that if she felt there
were any conflicts of interest she would stand down from other
roles as necessary.
asked about her previous
experiences and if there were particular issues she wanted to
deal with.
asked about the
stress-testing process and to what extent it was proven as a
method of resilience. Ms May said she understood it was a robust
process and results appeared to show the main financial firms
were in a resilient state.
asked about Brexit and the
risks which might be posed by a temporary permissions regime. She
felt that most firms, especially the big ones, were prepared for
Brexit.
asked about improving
diversity and gender equality in the banking sector. As the
former chairman of the women’s group at UBS, Ms May said it was
an ‘uphill battle.’ But the pace of change was encouraging.
asked about how climate
change would affect the PRA’s ability to assess the impact on the
soundness of business models, given that the risks are
unknown.
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started the second hearing by
asking Julia Black about operational resilience and the
threat posed by cyber crime. Ms Black thought it was one of
the PRA’s responsibilities to be asking firms about the risks.
about the architecture of
regulation and where it needed to be strengthened.
asked about the lessons of
the financial crash and future resilience.
also asked about the
resilience risk to avoid the mistakes of the past and Brexit.
asked about the change
in culture at firms since the financial crisis.
