to start applying them. resilience in the future if we continue to work together there is a real prospect of nurturing a market that keeps up with the cycles of human nature. but nature will fight back. the drivers of cycles will evolve. history may rhyme, but it rarely repeats. just look in this cycle at the rapid inflows of finance to commercial property from retail investors in open - ended funds. more than 6 % of the stock of commercial real estate finance is now held in these funds, and is growing rapidly. now, a shift in finance, from bank debt to fund equity can be good for stability. it ’ s one part of the broader inflow of equity in this cycle, which is helping to keep gearing down as prices rise. but it ’ s not risk free. fund investors offered redemption at short notice can create problems if prompted to herd to the exit. in the 2008 crisis, we saw redemptions from property funds reach more than one half of assets under management. many of you saw the consequences – firesales of assets, magnifying the market downturn. open - ended property funds now have 80 % more assets under management than they did on the eve of the crisis. so the growing importance of funds offering short notice redemption and investing not just in property but in other potentially illiquid markets too, is a focus of regulators in the uk and internationally. the bank of england, along with the fca, is looking closely at the ways these funds might contribute to broader instability. and it ’ s in part thanks to working closely with you that we ’ re alert to this. by working together, our nurturing of resilience can keep up with nature ’ s inevitable fight back. we can together create an environment that gives you the best chance of success. whether you succeed will be down to you. but one thing is for sure. your success is important to everyone. for its part, the bank of england is committed to ensuring the financial system serves you – the real economy. that ’ s why, here at guildhall, in 23 days ’ time, we ’ re hosting an open forum to bring together policymakers, financial market users, academics, and wider society. the aim is to chart the way for financial markets so that they serve their users and contribute to prosperity. bis central bankers ’ speeches you can sign up on our website. please do. because your industry has taken a lead in learning from the past, in

the banking system. your balance sheets have to be resilient too. over - gearing of your industry has been a major driver of instability in the past, making you vulnerable to the slightest change in sentiment. in part that ’ s the result of lenders offering deals in the good times that present even the most responsible investors with an impossible choice : gear up to uncomfortable levels or be forced out of the market. to avoid that hobson ’ s choice, any slipping of lenders ’ standards has to be addressed. that ’ s why we ’ re now reviewing the standards of major lenders regularly. carney m ( 2014 ) “ the future of financial reform ”, presented at a monetary authority of singapore lecture, november 17, 2014. bis central bankers ’ speeches this year we found loan - to - value ratios rising and interest cover ratios falling, but from a very conservative starting point. we ’ ll keep watching this, and there will be a new survey in coming months. we know that the importance of major uk lenders in financing you has almost halved since the crisis. while that diversity should be welcome – it should be a source of strength – it can be a source of weakness if it simply moves gearing into a shadow on our radar screen. it ’ s essential that our radar technology keeps up. the bank ’ s commercial property forum, ably chaired by ian marcus, helps us minimise the shadow on the screen. but we also want systematic data. that ’ s why i welcome the efforts of your industry, in partnership with us, to build a database of cre loans : a dataset that will be run and managed for the public good, while respecting commercial confidentiality. it can give you, and us, the information we need to manage the risk of loosening underwriting standards. long - term valuations but still more is needed to nurture a resilient market environment. you can become overgeared without technical slipping of underwriting standards. we ’ ve seen in the past how a change in sentiment can drive commercial property prices up even without the prospect of improvement in the cashflows which the property will generate. that creates headroom for those already in the market to borrow more without breaching their loan - to - value standards. and the use of that headroom drives prices up further. an ultimately pernicious spiral of sentiment and debt begins. valuations and debt increase sharply relative to the cashflows that support them