By including the NSFR in the suite of regulatory metrics, it would have been possible to capture the risks that Countrywide was undertaking without resorting to materially more stringent capital regulation. By contrast, Belgian bank KBC Group had an NSFR of 1.12, above the current indicative regulatory standard. For that time, it also had a reasonable risk-weighted capital ratio of 8.7%, well above the median capital ratio in the sample. But its leverage ratio was 3.5%. A system of regulation excluding the leverage ratio would have been unable to capture risks of the type KBC Group was undertaking prior to the crisis. 25  All speeches are available online at www.bankofengland.co.uk/speeches  25  The message from this counterfactual exercise, for all its obvious imperfections, is that multiple regulatory metrics may have helped historically in capturing the multiple dimensions of risk and uncertainty exhibited by banks pre-crisis. With the benefit of hindsight, multiple metrics would have helped identify most failing banks, without either high false alarm rates or potentially punitive calibrations of regulatory standards. While the exercise is based solely on survival and failure of banks during the global financial crisis, it highlights how a small regulatory portfolio beats, counterfactually, a single stock in (systemic) risk and (capital) return terms. As Greenwood et al (2017) argue, multiple regulatory constraints come at a cost by curtailing business models and thus reducing diversity in the financial system. Excessive homogeneity of the financial system can create systemic risks (Haldane (2009a), Wagner (2010)).

Another criticism of monetary policy owes to its alleged asymmetric response to asset prices. central banks would not lean against bubbles, but were prepared to clean the consequences after they burst. Investors were thus led to believe that monetary policies would always bail them out in case of trouble. This created a "macroeconomic put" which could only result in excessive risk taking. I am not fully convinced by those arguments for three reasons: •  First, to the extent that the crisis has been triggered by macro economic imbalances, the causes seem more real to me than monetary. Specifically, low nominal interest rates, between 2002 and 2005, reflected low real interest rates rather than permissive monetary policies. Indeed, when policy rates were progressively raised, in 2004 and 2005, long-term rates did not follow, and the yield curve flattened unexpectedly, creating the famous "conundrum". The abundance of saving in the world, especially in emerging economies, prevented real rates from rising, which both gave rise to capital exports to the US (and the accompanying current account deficit) and exerted worldwide pressure on the long end of the yield curve. •  Second, part of the bubble can be explained by more "structural" factors such as asymmetry in financial development between emerging and developed economies. According to the analysis developed by Caballero and others, the world suffers from an "asset shortage". The supply of liquid and safe financial instruments is insufficient to meet demand, and that supply is asymmetrically distributed across the world.