But it does not follow that the originate and distribute model will now or should now largely disappear. In these circumstances, there should be a debate about the future of regulation. A very good example of this is our approach towards vulnerable consumers. 0000004991 00000 n And, some businesses will succeed and some won’t, which is in the nature of competition and innovation. This is namely to enable change to happen consistent with our public policy objectives. • And these falling spreads and volatility prices driving up the current value of a range of instruments, marked to market value on the books of banks, investment banks and hedge funds – fuelling in turn higher apparent profits and higher bonuses, and as a result reinforcing management and traders certainty that they must be doing the right thing. I will though make one practical observation, which may have considerable implications for future choices. x�b```e``Y Indeed, we need to ensure that the regulation of liquidity is recognised as being at least as important as capital adequacy, a sense which was to a degree lost over the last several decades, with intense regulatory focus and international debates on capital adequacy, but less focus on liquidity – no Basel 1 or Basel 2 for liquidity to match the equivalents for capital. On the basis of this increased understanding, we will keep under review the appropriate balance of quantitative rules, stress test based analyses, and discretionary guidance. It is stating the obvious to say that over the last 18 months, and even more so the last four, the world financial system – and particularly but not exclusively the world banking system – has suffered a crisis as bad as any since the stock market crashes of 1929 and the various banking crises that followed. And, clearly since the 1970s the UK approach has become more hybrid as the EU space has expanded. At the start of 2009, many members of Congress talked about a fundamental restructuring of financial regulation. Therefore we have insurance via lines from other banks, liquidity policies to measure and limit the extent of maturity transformation, and ‘lender of last resort’ facilities provided by the central bank. H�\�͊�@F�y�Zv/�$U��l��\�c�Ĥtcb\��S� #t�1���|����ͮk'���z&ul�f��:�A©�\�������s5$iY.U�+^�L�M����^���؄��N��w�U��:�9t���j��p���U���T:{�5�z;��♯;>oCPz�0u߄�P�a��SH�Y���r?�$t�׽���X����vo�2��f*�TB��T@[��)Ϡ �C����3(�,�!�C- �CZC��`�cd0�7�����)���rjr In the US, securitised credit has also played a major role in mortgage lending since the creation of Fannie Mae in the 1930s; and securitisation had been playing a steadily increasing role in the global financial system and in particular in the American financial system for a decade and a half before the mid-1990s. Using in-depth analysis of recent legislation, he explains how a bank resolution can be successful, and emphasizes the need for taxpayer-funded bail-outs to create a viable banking system that will promote economic and financial stability. I think there are at least two important questions to answer on EU and UK regulation in the context of a future post-Brexit. Their guiding principle should be that they should create a banking system focused on the delivery of the value-added functions of banking which are so essential to a market economy. The question is how to strike a sensible balance. <<2F8A8B89F272C748B9F342FBE7BD7985>]>> My second point is that in this story, what happened to maturity transformation and to assumptions about liquidity was particularly important. The post-Brexit system cannot and should not seek to deny or ignore them. Bond yields were driven irrationally low and prices irrationally high by irrational exuberance between 2002 and early 2007, and the yields subsequently soared, the prices collapsed.

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