Estimating the impact of these vulnerabilities on the full distribution is a rich area for future work. The teal distribution conditions on average push and pull factors 1996-06. See Chart 5 and Annex for further details. systems become more sophisticated and institutions trusted and assets and liabilities created by the first two layers are actively managed. See, BIS Annual Review (2017), Understanding globalisation. 17  All speeches are available online at www.bankofengland.co.uk/speeches  17  Policy Priorities This possibility underscores that everyone must contribute to building the sustainable capital flows we need. Emerging market economies should continue determined reform of domestic institutional frameworks to turn pull factors into insulators rather than amplifiers. Historically, countries have only benefited from financial openness once they reach a critical threshold of financial depth and institutional quality.23 EMEs therefore need to reinforce the significant progress they have made on monetary policy credibility, including safeguarding central bank independence. Fiscal space will need to be used carefully given ongoing structural imperatives, the rising risks of global shocks, and the clear limits of monetary policy. To realise fully the benefits of financial openness EMEs need to reinforce banking system resilience and deepen their domestic capital markets, particularly to reduce reliance on foreign-denominated debt.24 It will be particularly important for EMEs to continue to develop macroprudential policy toolkits to guard against excessive credit growth and high levels of indebtedness. Tightening of prudential policy in EMEs dampens the spillover from US monetary policy tightening by around a quarter,25 and reduces Capital Flows-at-Risk (Chart 17).

In other words, just as new apps are constantly being developed for smartphones, so too will we be able to add new functionalities to the platform to meet emerging market needs and requirements. These functionalities will benefit from being designed for a single, harmonised platform. As we consolidate the financial market infrastructure in Europe, another area requiring further attention is that of collateralisation. With increased regulation following the financial crisis, collateral requirements are higher than ever. This is why it is so important that banks and  BIS central bankers’ speeches  1  financial institutions are able to manage their collateral in an efficient way and why the optimisation of liquidity-saving measures presents such a benefit to market participants. With T2S, it is now possible to have a single, centralised, pool of collateral, making it much simpler and faster to move collateral from where it is to where it needs to be. This then brings to the fore the issue of harmonising our own collateralisation techniques and procedures. As we look to the future, the Eurosystem will seek to drive harmonisation forwards, particularly as regards Eurosystem operations for the mobilisation of marketable assets, as well as the handling procedures for non-marketable assets. We live in a fast-paced world, and customers have come to expect instant services in all aspects of life, including from their banks.