For example, equity prices reflect, in part, investors’ expectations of future profits and their assessment of a bank’s management and business model, while bond yields and credit default swap spreads convey useful information about investors’ perceptions of default probabilities. Supervisors regularly evaluate market data in our assessment of financial institutions and these indicators generally show that investors’ confidence in the health of U.S. institutions has increased, although there has been some debate on the interpretation.8  Resiliency At the aggregate level, the largest U.S. banks have substantially improved both the quantity and quality of capital and liquidity, supporting the belief that the system is substantially more resilient 3/7  BIS central bankers' speeches  relative to the pre-crisis period. As shown in (Figure 1), the ratio of tangible common equity to risk-weighted assets has more than doubled from the crisis lows in 2009. Similarly, the ratio of net liquid assets to total assets has increased substantially over the same period.9 One can also look beyond the aggregates to see how capital and liquidity are distributed across large banks. (Figure 2) plots the aggregate ratio of tangible common equity to risk-weighted assets for a sample of large bank holding companies, and the 15th and 85th percentile bands. The entire distribution has shifted upward with the 15th percentile in 2016 comparable to the 85th percentile in the pre-crisis period. Not only has resilience increased in the aggregate, it has increased for most large institutions.

According to the National Federation of Independent Business, the proportion of small businesses that report credit as hard to get has declined to pre-crisis levels.11 This is consistent with the generally easing credit conditions across most loan classes over the last several years reported in the Fed’s Senior Loan Officer Opinion Survey, particularly in commercial and auto loans, but also expanding more recently into other types of household credit.12 This evidence suggests banks continue to provide this core financial service. 4/7  BIS central bankers' speeches  Turning to capital market activities, (Figure 8) plots non-interest revenues from core businesses —trading, investment banking, fiduciary activities, and securities brokerage. While trading revenue has declined, non-interest revenue of other types has generally grown in line with GDP, showing the compositional shift in revenue. The changes reflect the ongoing shift toward activities that generate more stable income streams such as fiduciary and brokerage activities. Looking within the trading business, there is also some evidence that activities are becoming less risky, less opaque, and less complex, e.g., level 3 trading assets have declined as a share of total trading assets over this period and there has been a shift toward central clearing of derivatives even as volumes continue to grow.13 I conclude this section by emphasizing that the supervisory goal is not to allocate credit or to dictate specific aspects of business models, but rather to ensure that firms are resilient so that they can meet the broader policy objectives of the sustainable provisions of financial services and financial stability.