Sarah Breeden has navigated some of the biggest shocks the UK economy has experienced in recent years, and she’s only about midway through her term as Deputy Governor for Financial Stability at the Bank of England. Her passion for public service, however, along with her optimism in the UK financial system’s resilience, shines through.

We begin with looking back at her time at Cambridge, which she recalls with both fondness and pragmatism: “It’s hard to imagine how I could have been better set up for success.” She observes how the intellectual foundation she received from Cambridge has translated into a professional environment, especially at an institution like the Bank of England, “where all our work is about making judgements about complex issues”. Not to neglect the social aspect of university life, Breeden also does not underestimate the importance of “a set of brilliant friends” that “give you confidence in yourself”.

“You need to build legitimacy and trust in what you do”

Breeden then took a gap year after graduating, although – with the typical risk-averseness of a central banker – not without a job at the Bank of England lined up. She has now worked at the Bank for almost 40 years: “central banking gets under your skin,” she says warmly. Breeden remarks that it is really a “special role, because you’re doing public policy, but as a technocratic organisation”. Her pride in the work she does is evident: “you need to build legitimacy and trust in what you do”.

As our conversation shifts to the current financial risks that the UK is facing, Breeden wryly says that she “had a really busy to-do list on the 25th of February”. She cites the war in the Western Asia and its macroeconomic consequences, along with a “step change” in the capability of AI models “coming to the fore,” as the key factors that have shaped her priorities since then.

“The fact that the financial system is still functioning is a testament to its resilience”

Naming high asset valuations and their consequences as a priority, Breeden remarks: “My job is to understand what might happen to the financial system and to the economy if market prices do adjust.” She also references the private credit boom as a key focus, explaining that the Bank is focused on understanding “whether an economic shock might cause that form of credit to have problems”. A third factor at the top of the “vulnerabilities list” is the core government bond market. She tells me that “ensuring that the market is resilient and operating is key.”

The importance of a resilient financial system is something that Breeden continues to stress throughout the interview. She notes the progress made since the Global Financial Crisis, stressing that “having a resilient banking system is something that puts us in a much better place to absorb any potential shocks.”

“As we looked over into the abyss of a systemic banking crisis, we managed to stop that happening”

Breeden looks back to the shocks that the financial system has weathered since 2020: a once-in-a century pandemic; Russia’s invasion of Ukraine; a fast increase in interest rates; the failure of Crédit Suisse; Liz Truss’s mini budget; President Trump’s tariffs; war in Western Asia. With this in mind, Breeden notes that “the fact that the financial system is still functioning is a testament to its resilience”.

Alongside the near-term risks, Breeden also focuses on the longer-term trends in the economy. Along with technological change, climate is the key long-term trend shaping the economy.

Breeden leads the Bank’s work on climate change. Having begun working on this in 2016, almost ten years ago, she observes the changes in financial institutions’ attitudes towards the climate. Ten years ago, it was a case “of explaining to financial institutions why this mattered to them”. Now, in a changing landscape, it is a case of helping them understand how to best “capture” these risks. “It’s changed from putting it on financial institutions’ agenda to helping make sure they’re doing as good a job as they can of managing the risks.”

She also points out how, for financial institutions, managing climate change is not only a risk they have to respond to, but also “a real opportunity”. They’re able to give us all financing to make our houses more energy efficient,” she tells me, “and they are funding infrastructure that is going to be resilient to a very different future”.

It is the Bank’s work on climate change that Breeden names as something she is particularly proud of. Looking forward, a key priority is also “making sure that new technologies are adopted sagely so that we can get productivity growth and support rising living standards for everybody.”

During our interview, I was struck by Breeden’s tenacity and broad, historical perspective on the financial system. Looking back to the 2008 Global Financial Crisis, her takeaway is strikingly positive. Unlike the Great Depression in 1929, she remarks that “as we looked over into the abyss of a systemic banking crisis, we managed to stop that happening. I’m immensely proud of that.”