Today the proportion is 40/60, and the emerging market countries continue to grow substantially faster than the large advanced economies. Yes, China is an important component of that growth, but the trend reflects strong performance in recent years in many regions of the world outside the advanced economies. A further long-run force, seen as the most disruptive, is technology. At one time, the financial system, perhaps until the 1970s or 1980s, played an important role in searching for savers/investors to contribute to financing those major investments. Much of the work of identifying and linking the sources and the uses of funds has been facilitated or even taken over by technology – just think of the ubiquity of trading platforms, screens, and financial news and, beyond that, the increasing automation and artificial intelligence applied to credit evaluation, financial analysis, and trading activities. I mention these three long-run forces because the financial industry has been and still is adapting to these trends. Indeed, the major transformation in the U.S. financial industry that  BIS central bankers’ speeches  1  occurred in the course of the 1980s and 1990s – the development of over-the-counter derivatives markets, the shift toward a larger role for securities markets relative to banking markets – was just such an adaptation to the long-run forces of change. The shift reflected the growth of institutional wealth and the power of technology, ubiquitous information and expanded financial know-how.

•  Capital and liquidity buffers in place through regulatory minimums and firms’ own economic capital calculations, once viewed as robust, proved in many cases to be inadequate to absorb mounting losses during the crisis. In addition, the supervisory apparatus proved slow to recognize and address the full dimension of the problem, and when some large, systemically important firms approached failure, the public sector lacked the tools to resolve them. •  Difficulties arose in winding down large derivatives portfolios because of their size and complexity, the back office logistics and settlement risks associated with derivatives portfolios, and the lack of a sufficiently harmonized international legal framework to handle counterparty default or failure. •  At least some business models in place before the crisis proved to be unsustainable. At many large institutions, the heavy reliance on generating mortgage-related revenues, whether through flawed underwriting or creating highly complex securities, proved a vulnerability; some institutions lacked stable revenue streams robust to macroeconomic conditions; some relied heavily on funding from short-term markets such as the tri-party repo market. Regulatory reform The wave of regulatory reform, of course, corresponds to a considerable degree with the problems observable during the crisis. Take, for example, solving the Too Big to Fail problem. The regulatory and financial stability agenda being advanced by the Financial Stability Board and the Basel Committee on Banking Supervision is intended both to reduce the probability that large, systemically important firms could fail and to mitigate the costs of their failure, should that occur.