- faster evaluation of creditworthiness, identification of prospective borrowers, and management of existing accounts. all these developments had their positive aspects, including for people in low - and moderateincome communities. prior to the introduction of the cra, as you know, many of these communities had limited access to mortgages and other forms of consumer credit. subsequent innovations in financial products and services, processes, and technology helped at least some underserved consumers more fully enter the financial mainstream, save money, invest, and build wealth, and homeownership rates rose significantly. yet with hindsight, we can see that something went wrong in recent years, as evidenced by the currently high rates of mortgage delinquency and foreclosure, especially in minority and lower - income neighborhoods. indeed, we have come almost full circle, with credit availability increasingly restricted for low - and moderate - income borrowers. and the damage from this turn in the credit cycle – in terms of lost wealth, lost homes, and blemished credit histories – is likely to be long - lasting. one would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be. a number of factors explain the recent credit boom and bust, including problems stemming from financial innovation. from a consumer protection point of view, a particular concern has been the sharp increase in the complexity of the financial products offered to consumers, complexity which has been a side effect of innovation but which also has in many cases been associated with reduced transparency and clarity in the products being offered. i will illustrate the issue in the context of some familiar forms of consumer credit : credit cards, mortgages, and overdraft protection. credit cards, mortgages, and overdrafts : some instructive examples the credit card is an example of financial innovation driven by technological advance, including improvements in communications, data management, and credit scoring. when the first general - purpose credit card was issued in 1952, it represented a way to make small loans more quickly and at a lower cost than the closed - end installment loans offered by retailers and finance companies at the time. moreover, this form of credit doubled as a board of governors of the federal reserve system ( 2007 ), report to the congress on credit scoring and its effects on the availability and affordability of credit, ( washington : board of governors, august ). means of payment. card issuers benefited by spreading fixed costs over multiple advances of credit

##ity - credit and funding indicators ”, imf policy paper, july 16, 2013. bis central bankers ’ speeches in the run up to the crisis, there was a buildup of international cross - border credit which was followed by a large decline immediately following the crisis ( chart 3 ). let me now turn to the impact of such ebb and flow of global liquidity on asset markets and the emes. bis central bankers ’ speeches impact on emes an environment of excessive global liquidity has been associated with high capital inflows to emes. during the phase of excess liquidity, global investors seeking higher yields shift their portfolios towards emerging markets exhibiting higher interest rates and better economic prospects. this is reflected in strong capital flows to emes, which may not always be consistent with their domestic fundamentals ( chart 4 ). this has implications for exchange rates, domestic monetary and liquidity conditions and overall macroeconomic and financial stability. while high and unstable capital flows can lead to macro and financial stability concerns, managing capital flows to minimise such concerns has costs. global liquidity could potentially lead to over - heating through augmenting domestic liquidity ; loss of competitiveness through exchange rate appreciation ; and increased vulnerability to crisis through spillover to various segments of financial sector. furthermore, fluctuations in global liquidity make capital flows to emes more unstable. this in turn makes it difficult for policymakers to assess and distinguish between the durable and transitory components of capital flows, constraining their ability to effectively pursue domestic policy objectives. in short, capital flows inconsistent with domestic absorptive capacities in emes complicate macroeconomic management. it is also argued that major central banks engaging in ultra - accommodative monetary policies at the same time give a large positive shock to global liquidity that feeds into commodity and food price inflation. 3 easy access to wholesale funding markets saw increasing participation belke, ansgar, ingo bordon and ulrich volz ( 2012 ), “ effects of global liquidity on commodity and food prices ”, diw working paper no. 1199, deutsches institutfur wirtschaftsforschung, berlin. bis central bankers ’ speeches of major investment banks in the commodity market leading up to 2008 crisis4. correlation between cross - border credit and international commodity prices suggests a possible link between global liquidity and financialisation of commodity markets. in 2008, global capital inflows retreated from the emes. the resumption