Bank of England chief highlights value of academic research at Bayes

Central bankers, regulators and academics gathered at Bayes Business School last week to explore how regulation and innovation in the financial sector supports long-term productivity and sustainable growth.

Academics from around the world presented 212 research papers exploring issues and challenges in the financial services sector.

The Bank of England’s Director of Prudential Policy, David Bailey, delivered a keynote on 'the role of research in prudential regulation'.

He said: “As a policymaker, there are two key reasons why policymakers should be deeply interested in making sure research is embedded right at the heart of the policymaking process. First, research helps to shed light on, and often quantify, the mechanisms through which policy operates. It helps provide a more structured understanding of cause and effect, and it helps policymakers identify and assess trade-offs inherent in different policy designs.

“Post-implementation, research plays a really important role in helping us evaluate whether some of our policies have delivered the intended outcomes.”

Huw Pill and Kate Collyer, chief economists at the Bank of England and UK Financial Conduct Authority respectively, took part in a panel discussion on how competitiveness and innovation can “contribute to sustainable economic growth while preserving the resilience on which that growth ultimately depends”.

Mr Pill said: “It's about having the right level of financial regulation and supervision that supports both growth and stability. It’s also a question of the quality of regulation. In a rapidly changing technological world, we have the scope to regulate better, to have better access to richer data and to analyse it more effectively in real time. It really does create scope to modernise and improve the efficient frontier of regulation.”

Ms Collyer said that in fulfilling its primary objectives – protecting consumers and promoting competition and market stability – the FCA also met its secondary objective: to promote sustainable growth and the sector’s international competitiveness.

She said: “We know that in order to achieve sustainable long run growth, we need trust and confidence in our markets because it's that trust that means firms will take risk and make investments or enter into contracts. And that's true for consumers as well: by having trust in the providers of the services that you're buying from, you can be more confident about entering into financial arrangements.”

She suggested that the regulator is trialling how it can rebalance risk – for example, through its PISCES project, which allows intermittent trading in private company shares.

“This allows founders and staff who have joined private firms without going into public markets to trade so they can raise new capital for investment for themselves. And of course, that then means that investors get access to private markets."

For me, this is a good example of regulatory innovation and also a rebalancing of risk because it's a less liquid market so it doesn't come with the same protections as public markets.

Professor Barbara Casu, Deputy Dean of Bayes and Director of its Centre for Banking Research, said the conference was an important milestone as academia and industry focus on the role of regulation and innovation in supporting long-term productivity and sustainable growth.

She continued: “At a time of rapid technological change, evolving prudential frameworks and increasing geopolitical uncertainty, understanding how financial systems can remain both innovative and resilient has never been more important. The conference provided an opportunity to discuss these issues through rigorous academic research and constructive dialogue between academia, industry and the policy community.”

The IFABS President, Professor Meryem Duygun, said “As President of IFABS, I believe that bridging academic research with policymakers and the private sector is essential for creating genuine, lasting impact. In an increasingly complex global financial landscape, this alignment is no longer merely beneficial – it is indispensable.

“The challenges of tomorrow cannot be solved in isolation; they demand unified action across academia, industry and policy to build a financial system that serves society’s best interests while delivering long-term resilience and sustainable growth.”