November 25, 2011
UK - Promoting a prudent and stable financial system
"...I am going to speak this morning in the style of a game of two unequal halves. In the first half I am going to talk about the pressures on the industry, and the pressures in retail banking today. And then, in the second half – which is shorter than the first – I am going to draw on my experiences of seven years as the Chief Cashier of the Bank of England to talk about one or two of the conclusions that I reached from what I saw of the banking industry in that role...There is also little doubt that the package of regulatory reforms taken as a whole, including Basel III, will prompt a re-think of the role of position-taking investment banking activities within banks. One of the features of the growth of the balance sheets of many of the large banks in the decade before the crisis was the substantial growth of on-balance sheet position taking in what could not – quite honestly – be described as assets that were all likely to remain liquid in terms of the ability to trade them in times of stress. Many of these assets are now regarded by banks as non-core, and the focus, rightly, of sale and deleveraging plans. Many of these are the sorts of assets that can be removed from balance sheets without jeopardising the real economy. And they need to be removed to restore the confidence in the balance sheets of banks."
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