It has long been my contention, set out with some care in The Wealth of Nations, that the business of banking touches the public interest so immediately that it cannot be left entirely to the discretion of private men, however eminent their faculties or considerable their capital. The Parliament of the United Kingdom has now extended that principle to a class of commercial enterprise that did not exist in my own age — the great technologists — and has empowered the Bank of England to stand as their overseer in all matters touching the resilience of the financial system.
The firms brought within this new supervisory embrace include, among others, concerns denominated Amazon and Google, together with Oracle and Microsoft — four manufacturers of a kind of invisible infrastructure, neither warehouse nor weaving-shed, but something rather more difficult to describe: a vast reticulation of stored information and computing power upon which the daily settlements of banks, insurers, and other financial houses now depend as completely as any mill depends upon its waterwheel. The Parliament calls these concerns critical third parties, which is a serviceable modern phrase for what I would render as indispensable auxiliary servants of the financial order — servants who have, by degrees, grown rather larger than the households they serve.
The Bank of England is to satisfy itself that the cyber-defences of these parties are adequate to prevent the kind of systemic failure that could, in an afternoon, arrest the settlement of debts across an entire nation. This is, on its face, a rational arrangement. A man who keeps a great public granary is rightly subject to inspection; that the granary now consists of servers and software rather than grain and timber alters the principle not at all.
What does occasion reflection is the disproportion of scale. The aggregate market valuation of the four concerns named above is, by recent reckoning, measured in the many trillions of pounds sterling — a figure that exceeds the annual produce of most sovereign states and sits at a remove from the annual budget of the Bank itself that would have staggered any calculator of the last century. The regulator is, in the strict economic sense, very considerably smaller than the regulated.
I do not say this is ruinous. The sovereign's authority has never been a function of his treasury alone. But it is worth observing, with the equanimity that the subject deserves, that the Bank of England was established in 1694 to lend money to the Crown; it is now charged, in addition, with auditing the fortifications of enterprises whose revenues in a single quarter would have discharged that original loan many times over. The division of labour, as I have observed, produces effects which no single workman in the original trade could have anticipated.
Whether the new powers will prove sufficient to the task is a question that time and the ingenuity of those being regulated will together answer. What is already certain is that the boundary between private commercial enterprise and public financial order has shifted once more — and that the Bank of England now stands, in this domain at least, precisely where it has always stood in others: in the uncomfortable, necessary, and thoroughly English position of being responsible for everything and master of rather less.