Andrew Bailey, recently returned to FSA after working at the Bank of England, spoke to the APCIMS conference on why prudential regulation matters. He said the new regulatory structure will provide an opportunity properly to understand why regulators supervise firms. He said regulators will not pursue the competitiveness of firms for its own sake, nor will they pursue a zero failure regime. He said orderly failure is not a sign that supervision has failed, and this is why FSA is focusing on resolution as a core part of supervision. He also spoke of the need for a more transparent system of supervision, and the importance of supervisors exercising judgment in supervision. He said this would be a challenge, given the plethora of rules coming from Europe, and the UK regulators must have a clear public policy objective to help them impose their judgment on firms' activities. He moved on to discuss the importance of the internal audit and risk management functions in firms, which he said has been under-appreciated in the past. Finally he stressed that the new focus on looking forwards to assess the possibility of future insolvency was bringing supervision and monetary policy together more than previously. (Source: Andrew Bailey Speech to APCIMS)