In the decade prior to the crisis, in both the euro area and the UK, inflation was low, stable and predictable. Inflation targets were achieved without causing undesirable volatility in output and employment, the so-called “divine coincidence”.1 Both regions experienced continuous expansions in activity. It is not entirely surprising that “end of history” declarations of the Great Moderation were increasingly commonplace. But such nominal stability masked growing financial imbalances and increasing strains in competitiveness. The financial crisis would expose how a healthy focus on price stability had become a dangerous distraction. Central banks had won the war against inflation only to lose the peace. When the music stopped, the consequences for the real economy were dire. In both the euro area and UK, output fell by around 6% and unemployment rates rose initially by 2½ percentage points. It took 7 years for GDP per capita to recover to pre-crisis levels. In response, the financial system and the institutional architecture have been fundamentally reformed. The capital requirements of large global banks are ten times higher than the pre-crisis standard. Liquid assets – 1  See Blanchard, O., and J. Galí (2007). "Real Wage Rigidities and the New Keynesian Model". Journal of Money, Credit, and Banking, 39(1), pp. 35-65. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  relative to liabilities that can readily run – are also tenfold higher now than before crisis. We are ending too big to fail and transforming the resilience of financial market infrastructure.

During these initial conversations, the concept of macroprudential supervision was introduced as a means of mitigating systemic risk, but the discussion largely centered on defining what macroprudential supervision might entail, and how it differs from more traditional microprudential supervision. More recently, the systemic risk discussions have become increasingly technical and practical in nature—focusing on the details of the resolution regime, monitoring shadow banking and considering implications of shifting activity, and on actual approaches for conducting macroprudential supervision. 1/3  BIS central bankers' speeches  Second, governance has been a frequent topic. Again, this is understandable given its central importance for private sector risk management and the official sector reform agenda. It is interesting that the assortment of discussion topics under the governance agenda item has been remarkably stable over the years. The agendas examined the appropriate roles of the board of directors and senior managers, the degree to which the official sector should prescribe risk management practices and principles, and the need to tailor such expectations depending on an institution’s business models and risk profiles. We should also think beyond the traditional governance topics to determine if other key risk types should be covered within these frameworks. I’ll return to this latter point. The third theme is the changing nature of the discussions around regulatory reform. In 2011 and 2012, much of the agenda focused on the “what” and the “how” of the reform package —what should be included in the reforms and how would these mechanisms work in practice.