ANDREW BAILEY BANK OF ENGLAND ON MONETARY CHANGES CBDC

NEW RELEASED AND AIRED TODAY 12/04/2023 - THEIR WORDS! The short version of the main points:

1: I don’t believe we face a systemic banking crisis;

2: We must ensure that financial stability continues to mean that monetary policy takes into account financial conditions but does not have to aim off for instability;

3: This requires robust structures for financial stability policymaking;

4: Central bank balance sheets will remain larger than pre-crisis for financial stability reasons;

5: We don’t know yet where central bank balance sheet reduction will need to stop in terms of the necessary level of reserves;

6: This will in part depend on the desired future size and make-up of banks’ liquidity buffers;

7: Stable coins will need to have the characteristics of, and be regulated as, inside money;

8: The key question on retail digital money is can we envisage a demand for it, but we should guard against failure of imagination; and be able to accommodate it within the regulatory framework;

9: If retail digital money is part of the future, it would be better not to disturb the need to have both inside and outside money – so we cannot rule out a need for CBDC;

10: We will need to revisit the protection of inside money in the form of deposits, especially in smaller banks;

11: Stress testing the financial system is crucial, but stress tests will not always deal with Black Swans – that’s why resolution and other policy intervention tools must be in place;

12: Non-Bank Financial Intermediation is a very large and heterogeneous landscape – it presents surveillance challenges of both breadth and depth;

13: NBFI leverage and inter-connectivity can be hard to map;

14: NBFI issues are often inherently cross-border in nature. The role of the FSB is important;

15: Macro and micro-prudential policies need also to support lending to and investment in the economy;
SOURCE: https://www.bankofengland.co.uk/speech/2023/april/andrew-bailey-remarks-at-the-institute-of-international-finance