Thank you, Mr Hood. The Financial Policy Committee of the Bank of England recommended that the PRA ensure that banks take a prudent approach to the calculation of risk weights.

Two questions arise from new clause 20. First, who should conduct such reviews? Secondly, what should be the timing of the reviews? On the first, the Bank of England is specified as the body that would conduct such reviews of risk-weighting. That is certainly possible, but there is a question about whether it should be the FPC or the PRA. After all, the PRA has the ability to review and adjust risk weightings in relation to individual firms and the financial services sector more generally. On the second question about the timing of reviews, we would want to consider, given the international work being done to conclude at the end of this year and the next, to which the UK is a significant contributor, when might be the next time that such a review should take place and how frequently reviews should happen.

Notwithstanding the approach that we have hitherto taken, there is much merit in the new clause’s approach and we will consider it and report back at a later stage on what arrangements are best put in place to keep the important matter of risk-weighting under review.