This simulation is similar, if not directly comparable, to the macro-prudential intervention made by the Bank of England’s Financial Policy Committee (FPC) in June 2014. Chart 11 looks at the simulated impact of this policy on the distribution of loan-to-income ratios across households, relative to a policy of no intervention. The incidence of high LTI mortgages (above 3.5) decreases, with some clustering just below the limit. With some borrowers nudged out of riskier loans, a greater degree of insurance is provided to households and the banking system. Another advantage of these class of models is that they allow you to simulate the longer run impact once the second round and feedback loops have taken effect. Chart 13 shows that the distribution of house price growth narrows under the scenario relative to the baseline. 31  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  31  Chart 11: Simulated effect of a loan-to-income policy  Chart 12: Simulated effect on house price growth  Source: Baptista et al (2016). Source: Baptista et al (2016). (b) An Agent-Based Model of Financial Markets  A second ABM project looks at behaviour in financial markets (Braun-Munzinger, Liu, and Turrell (2016)). As in the housing market, this involves complex interactions between multiple agents. And as in the housing market, these interactions are prone to abrupt dislocations in prices, fattening the tails of the asset price distribution. Chart 13 looks at the empirical distribution of daily corporate bond price movements over various intervals, pre and post crisis. It is clearly fat-tailed.

It hosts one of the most developed capital markets in continental Europe, four global banks, the first insurance and asset management industry, a leading bond market, the largest commercial paper market with NEU-CP and the largest private equity investor in continental Europe. In addition, French financial authorities, including the Banque de France, are working together to facilitate the dissemination of sound and safe financial innovations and fostering the scaling up of sustainable finance. Green finance in particular is one of our priorities, and this is the reason why, at the One Planet Summit last December, the Banque de France launched the Network for Greening the Financial System (NGFS), together with central banks and supervisors from all over the world. Moreover, a number of international banks have decided to transfer the bulk of their market activities to Paris, and Japanese financial institutions will always be welcome in Paris. 2. Beyond Europe, our collective questions Let me turn to the global questions that we have to address together, starting with Japan and France. I guess our views are very close here. There are increasing tensions in the global environment, starting with protectionism. Beyond the direct trade policy shock resulting from a rise in import tariffs, two factors at least may amplify the decline in global GDP: a decline in investment demand caused by firms’ falling business confidence due to uncertainty, and a rise in the financing cost of capital due to an increase in actual or perceived borrower risk.