The picture they paint is a sobering one. Thompson (2016). The irony of making these points in a long speech is not lost on me. DuBay (2004). 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  For example, Chart 14 takes a set of regular Bank of England publications (MPC minutes, MPC statements, excerpts from the quarterly Inflation Report, Governors’ speeches) and assesses their linguistic complexity over time. It uses one well-known measure of linguistic complexity, the Flesch-Kincaid reading grade score. 60  These central bank publications are compared with a set of external publications (broadsheet and  tabloid newspapers, the Economist magazine and political speeches). Bank of England publications have an average reading grade score of around 14 – that is to say, they would be expected to be understood, on average, by someone aged around 20. They have been steady around this level for a number of years. In linguistic complexity terms, that puts them around 2 years ahead of broadsheet newspapers, 4 years ahead of tabloid newspapers and around 6 years ahead of the average political speech. They are around 5 years ahead of the average Dickens novel. We can do the same exercise for a selection of Federal Reserve publications (FOMC minutes, speeches by the Chair, Beige Book summaries) and compare those with some external publications (the New York Times, Washington Post and Financial Times and US political speeches). Chart 15 suggests Fed publications tend to have a higher reading grade score than Bank of England ones.

This played a vital role in fostering the euro area recovery that is currently under way. Financial sector policies The greater awareness of the costs of financial instability and of financial frictions has also resulted in a revamp of financial sector policies. First, financial sector regulation and supervision are much stricter. The quality of regulatory capital has improved and its quantity has increased. In the euro area, banks have materially bolstered their capital positions, with the average common equity Tier 1 ratio of significant institutions rising to 13.5% by end-2016 from 7% in 2008. The establishment of a new stress testing framework lends a further quantitative dimension to the process of ensuring that, even in a pre-defined “stressed scenario”, financial institutions should remain well capitalised and able to continue lending to creditworthy borrowers. Second, policymakers have acquired new macroprudential tools to mitigate the effect of financial cycles on the economy. Across the globe, authorities have imposed measures such as loan-tovalue and loan-to-income ratios, to reduce the endogenous link between credit and house prices. This new macroprudential approach to regulation aims to safeguard not just the solvency of individual banks but also the systemic integrity of the banking system and its ability to continue providing finance to the non-bank private sector. In addition to the overall global move to stricter regulation, there have been also a number of institutional improvements. In the euro area, banking supervision is now carried out by the Single Supervisory Mechanism, composed of the ECB and the national competent authorities.