So, this must be good news – apart from the inconvenient questions one asks from time to time about “How long will it last?” or “Is it sustainable?” For Emerging Market Economies, we have all witnessed the inflow of capital at the initial stages of the QEs, which drove up asset prices and inflationary pressure. This is not surprising as investors have no choice but to take aggressive steps to search for yields globally. This results in a misallocation of resources, as the abnormally low interest rates distort investment decisions by allocating capital away from productive real investment into risky assets that yield higher returns. The lack of real investment in turn reduces medium-term potential growth. Indeed, business investment growth in the US has been lacklustre since the economy recovered from the global financial crisis. The misallocation of resources aside, the search for yield behaviour also leads to a mispricing of risks across a wide spectrum of asset classes. In the US, junk bond issuance has risen sharply in the past few years, accounting for about 24% of all bond issuances so far in 2013, while the average high-yield spread has fallen below 5%. While the buoyancy in the asset markets helps support the economy in the short term, imbalances could build up in the economy and the financial system that may pose a threat to systemic stability when the unconventional monetary policies begin to unwind. 13.

This should help support a proportional approach to regulation, as part of the Future Regulatory Framework proposals set out by the Treasury.18 This new framework would make it easier for our regulation to adapt to innovation, and deliver a more tailored regime for firms, responding dynamically to new challenges. We are also looking forward to working with the FCA as their Scalebox develops. We continue to work closely more generally with them on the supervisory approach to new and growing dual-regulated firms. 14  https://www.bankofengland.co.uk/prudential-regulation/publication/2019/outsourcing-and-third-party-risk-management https://www.bankofengland.co.uk/speech/2020/sarah-breeden-climbing-mountains-safely 16 https://www.bankofengland.co.uk/prudential-regulation/publication/2020/new-and-growing-banks 17 https://www.bankofengland.co.uk/speech/2020/sam-woods-city-banquet 18 https://www.gov.uk/government/consultations/future-regulatory-framework-frf-review-consultation 15  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  Cross-authority and international collaboration  The Bank is just one of many institutions with a role to play in the evolving fintech landscape. And we regularly work with other public authorities as we fulfil our role, including the FCA, the Treasury, and Payments and Competition authorities. A number of institutions have put out proposals and consultations on how the UK’s regulatory framework should adapt to support financial innovation. The Payments Landscape Review, led by the Treasury, has gathered evidence across the breadth of the payments sector to understand the rapid technological developments and what that might mean for regulation. 19 The Treasury has also launched a consultation on the regulation of stablecoins,20 and the FPC has set out its expectations for stablecoin-based payment chains.21 And Parliament has launched an inquiry into the Future of Finance in the UK.