recession in our lifetimes. – poor “ soft ” infrastructure such as codes of conduct that too few read and too many ignored. – faulty “ hard ” infrastructure like interest rate and foreign exchange benchmarks that were quite literally fixed ; and – weak banks whose light capital and heavy reliance on short - term funding created a tinder box. central banks shared in these failings, operating a system of fire insurance whose ambiguity was anything but constructive when global markets were engulfed in flames. the bank of england ’ s general approach was consistent with the attitude of ficc markets, which historically relied heavily on informal codes and understandings. that informality was well suited to an earlier age. but as markets innovated and grew, it proved wanting. most troubling have been the numerous incidents of misconduct that exploited such informality, undercutting public trust and threatening systemic stability. this has had direct economic consequences. mistrust between market participants has raised borrowing costs and reduced credit availability. falling confidence in market resilience has meant companies have held back productive investments. and uncertainty has meant bis central bankers ’ speeches people have hesitated to move job or home. these effects are not trivial, and they have reduced the dynamism of our economy in the post - crisis years. 1 widespread mistrust has also had deeper, indirect costs. markets are not ends in themselves, but powerful means for prosperity and security for all. as such they need to retain the consent of society – a social licence – to be allowed to operate, innovate and grow. repeated episodes of misconduct have called that social licence into question. we have all been let down by these developments. and we all share responsibility for fixing them. real markets i believe everyone in this room would agree : we need real markets for sustainable prosperity. not markets that collapse when there is a shock from abroad. not markets where transactions occur in chat rooms. not markets where no one appears accountable for anything. real markets are professional and open, not informal and clubby. participants in real markets compete on merit rather than collude online. real markets are resilient, fair and effective. they maintain their social licence. real markets don ’ t just happen ; they depend on the quality of market infrastructure. robust market infrastructure is a public good, one in constant danger of under - provision because the best markets innovate continually. this inherent risk can only be managed if all market actors, public and private, recognise their responsibilities for the

system as a whole. the city has a special responsibility given london ’ s pre - eminent position in global markets, which is why it has already brought so many ideas and such energy to advance financial reform. 2 financial reform is re - building real markets reform is strengthening the resilience of major banks. their capital requirements have increased ten - fold and their liquid assets are up four - fold. these banks ’ trading assets are down by a third and intra - bank exposures by two - thirds. reform is ending the scourge of too big to fail. the combination of eliminating the implicit public subsidy and increased capitalisation will correct the distortions caused by the structural under - pricing of risk on banks ’ balance sheets. and by making a further shift to market - based finance inevitable, it is increasing choice and competition – real market forces. reform is also improving risk transfer by untangling the complex web of derivatives that meant failures like lehman triggered chaos ; and by creating simple, transparent and comparable securitisation markets. this reform agenda has increased the effectiveness of ficc markets and reinforced their social licence. see haddow, a, hare, c, hooley, j and shakir, t ( 2013 ) “ macroeconomic uncertainty : what is it, how can we measure it and why does it matter? ”, bank of england quarterly bulletin, q2. see also bloom, n, et al ( 2014 ), “ really uncertain business cycles ”, mimeo. examples include the contribution of the private sector to : the development of revised isda protocols as part of efforts to tackle too big to fail ; improvements in disclosure under the aegis of the enhanced disclosure taskforce ; consultation over tlac proposals ; the establishment of the banking standards council ; and ongoing work to develop the appropriate near - risk free reference rate for sterling markets. bis central bankers ’ speeches it is frustrating for us all that such major progress risks being overshadowed by misconduct problems. the fair and effective markets review we must break the back of these issues, and the fair and effective markets review shows the way forward. with its publication today, all the main building blocks are now in place for the real markets we need. i want to pay tribute to my colleagues charles roxburgh, minouche shafik and martin wheatley, who so ably led the review. and to salute elizabeth corley, who so expertly chaired the review ’ s independent market practitioner panel, canvassing and