But, of course, the most pernicious forms of myopia surely come out of prolonged periods of apparent tranquillity in markets and the economy. That is when everyone gets suckered into believing the world is a safer place than it is, with elegant theories and eloquent practical stories for why the world has really changed. Which ultimately tips us from tranquillity to disaster. One of this university’s greatest twentieth century thinkers taught us that what counts as an argument – not just as a good argument, but as an argument at all – is not always firmly grounded. The deepest problem during the years in which a grave crisis is brewed is that those who see the signs are marginalised or literally not heard. What on earth are we to do about that? Part of the solution must lie in the design of policy institutions. One reform would ask a dedicated and expert group to identify risks to stability and give them powers to address those risks that threaten the system or are leaving it vulnerable; and, vitally, to require them to stick at that task year in-year out, even when everyone else would otherwise be losing interest, taking stability for granted. As Adair said this evening, that is precisely what is going on in the UK through the creation of the Bank of England’s Financial Policy Committee. The first members were announced yesterday. This is a big reform.

They also report higher transparency of banking supervision (based on adherence to the IMF code) in industrial countries than in emerging economies. Another, more recent research (Liendrop at al., 2011) suggests that the overall level of transparency of supervisors in industrial countries is very similar to transparency of supervisors in emerging economies indicating to positive movements in emerging markets in the area in recent years. Indeed, supervisors seem to endorse transparency. In 2006 the Basel Committee on Banking Supervision, in the Basel Core Principles for effective banking supervision, first mentioned that supervisors should follow transparent processes. This means that supervisors should disclose their objectives and  2  BIS central bankers’ speeches  framework and be held accountable for performing their duties in line with those objectives and framework. The Capital Requirements Directive IV (CRD IV) stipulates that supervisors need to publish relevant information on the laws, regulations, administrative rules and guidance, information on options and discretions, the general criteria and methodologies used in the supervisory review and evaluation process, and aggregate statistical data on the implementation of the prudential framework, including the number and nature of supervisory measures taken and administrative penalties imposed.The European Banking Authority (EBA) acknowledges the need for supervisory transparency and has set up guidelines for supervisory transparency (CEBS, 2010) intended to increase the transparency of supervisory practices and to enhance the comparability of national practices. Furthermore, EBA publishes relevant information of all EU countries on supervisory laws and regulations and statistical data on national banking sectors, risk indicators and supervisory actions.