Whether they do so in practice depends on loopholes in, or omissions from, the ring-fence. And each of the existing proposals has open questions on this front. For example, the Volcker rule separates only a fairly limited range of potentially risky investment bank activities, in the form of proprietary trading. The Vickers proposals mandate only a limited range of basic banking activities to lie within the ring-fence, namely deposittaking and overdrafts. And the Liikanen plans allow a wide range of derivative activity to lie outside of the investment banking ring-fence. It could be argued that these loopholes are modest. But as the history of the Glass-Steagall Act demonstrates, today’s loophole can become tomorrow’s bolthole, today’s ring-fence tomorrow’s string vest. At a minimum, this suggests the need for full and faithful implementation of the spirit as well as the letter of the Volcker, Vickers and Liikanen plans if risk cross-contamination is to be avoided A larger question-mark still hangs over whether these proposals will lead to a sea-change in the allocation of resource to retail and investment banking. The cultures of investment and retail banking are quite distinct. Retail banking relies on forming long-term relationships, while investment banking is inherently shorter-term and transactional. Housing these subcultures under one roof makes achieving the necessary separation of cultures and capital a significant operational headache. At a minimum, such a separation of culture and capital is likely to require entirely separate governance, risk and balance sheet management on either side of the ring fence.

2/4  BIS central bankers' speeches  Second, innovative financing models to fund affordable housing projects should be further developed. Current intervention measures largely focus on subsidising home-buyers or the direct provision of housing. Over the longer term, these need to be complemented by new, more sustainable alternatives that combine public and private funding for affordable housing development and investment. In other parts of the world, public-private partnerships through joint ventures have replaced traditional methods of financing for the supply of public housing. Public funding could also be deployed more efficiently to crowd in private capital for affordable housing developments – for example, by providing cost-efficient funding to institutions that finance affordable housing projects. Regardless of the measure, it will be crucial to build in mechanisms that promote programme efficiency and effectiveness. These include business models that are based on sound commercial principles, good governance and appropriate risk management strategies. Schemes introduced could specify minimum technical standards, execution guarantees and other conditionalities for financing or payment. ‘Social impact bonds’ – which have gained interest in some countries such as the United Kingdom, United States, and Australia – are a useful example. These investment structures operate on a “pay-for-success” model, where the Government repays the costs of a programme plus a return, only if pre-defined social outcomes are achieved. Third, there is a need to foster more diverse collaborative partnerships to deliver affordable housing. This includes a vibrant community of social housing enterprises, private foundations and non-profit organisations that support or complement the Government’s affordable housing agenda.