This is because international trade has increased rapidly over the past few decades as the world economy has become more developed and globalized – notwithstanding the flattening of the global trade-toGDP ratio over the past few years. And, global trade interactions have become more complex as supply chains have become more extensive and intricate, often involving many different countries. Financial markets across the globe have also become more integrated. Developments in one market now appear to have larger effects on other markets than was generally the case historically. Consider, for example, how European and Japanese central bank quantitative easing activity has helped drive the sharp decline in long-term U.S. Treasury yields this year. Or, in the other direction, consider the global bond market taper tantrum in 2013. In this case, markets reacted to then-Chairman Bernanke’s musing that the Federal Reserve was beginning to evaluate when the time would be right to begin the tapering of the Fed’s asset purchase program. Or, in a similar vein, consider the international financial market reaction to China’s decision to alter its foreign exchange rate regime and how the RMB is managed relative to the dollar versus a broader basket of foreign currencies. The growing interdependence can be seen in the increased correlation of market movements both across countries and across asset classes. Periods of “risk on” versus “risk off” trading now occur on a global basis. For example, equity market movements in developed and emerging markets have exhibited a 76 percent positive correlation over the past six months.

We will tailor rules to UK circumstances when that is appropriate and when we can do so in ways that maintain trust. We are working hard to deliver this plan. That is why I am able to use this occasion to announce the publication of two consultation papers proposing tailored liquidity, disclosure, reporting and remuneration rules for small banks and building societies. These proposals show how we can use our rule making powers in ways that are good for competitiveness and growth. We are also today publishing analysis of the impacts of previously announced proposals. This analysis is about how our proposals will narrow the gap between capital requirements faced by large and small mortgage lenders. This analysis will feed into policy development work to simplify capital requirements for smaller banks and building societies. I’ll conclude by launching a conference we will hold in September to deepen our understanding of the links between prudential regulation, international competitiveness, and growth. At that  Page 3  conference we will share ideas about how we can provide information (including appropriate quantitative metrics) that Parliament can use to judge our performance. How finance supports competitiveness and growth Competitiveness is a complicated economic concept which doesn’t have a uniformly accepted, text-book definition. [1] The impact of finance on economic prosperity is well understood, but there is little research that can help us understand the contribution of prudential regulation to growth through the channel of international competitiveness. [2] So I and my colleagues have been thinking hard about these concepts.