jon cunliffe : learning from the dash for cash – findings and next steps for margining practices speech by sir jon cunliffe, deputy governor for financial stability of the bank of england, at the futures industry association ( fia ) & securities industry and financial markets association ( sifma ) asset management derivatives forum 2022, dana point, california, 9 february 2022. * * * it is now nearly two years since the ‘ dash for cash ’ that swept through financial markets at the onset of the covid pandemic. a great deal of work is underway by central banks and the international regulatory community to learn the lessons of that episode. and i want to talk today mainly about one element of that work : the examination of the role played by margin payments, both cleared and uncleared. but first, it is important to remind ourselves of just why we are engaged on this work and why it matters that we learn the lesson of that short lived but potentially extremely destructive episode. unlike the great financial crisis ( gfc ), more than 10 years ago, one senses that the 2020 ‘ dash for cash ’ is fading from memory. there are obvious reasons for this. the disruption did not last long. by early may 2020, order had returned to financial markets. there were no spectacular bank failures. indeed, strengthened greatly by the post - gfc reforms, banks were able to meet the huge drawdown of credit facilities at the beginning of the crisis. unlike 2008, the solvency and liquidity of the banking system was not at the very forefront of market and regulator concerns. and, of course, the shock itself did not originate in the financial system but rather in a once - in100 year pandemic that has left us with many other, more powerful, and disturbing memories. but it is worth refreshing our memories about just how extraordinary were the events of late february and march 2020. the realisation that we were facing a global pandemic – and that, in order to contain it, large parts of the global economy would need to be shut down – sparked a reassessment of financial asset values and, as one would expect, a ‘ flight to safety ’ by investors. in february 2020, as you would expect, risky asset prices fell sharply. at the same time, the price of traditionally safe assets rose sharply and yields fell – the yield on us treasuries for example fell by around 100 bps. this flight to safety was also reflected

rtgs - service - for - the - uk carney, m. ( 2019 ). a new horizon. available at : https : / / www. bankofengland. co. uk / speech / 2019 / mark - carney - speech - at - europeancommission - high - level - conference - brussels all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx in parallel, the bank is overhauling its supervisory approach. earlier this month we published a supervisory statement and policy statement3 that together set out our expectations for banks and insurers regarding their governance, risk management, strategic resilience and disclosure of climate - related financial risks. to support the capacity building and the development of best practice, the pra has just established the climate financial risk forum to work with firms from across the financial system. the bank of england is also working with central bank and supervisory colleagues from around the world in the network for greening the financial system ( ngfs ) to improve climate risk management in the core of the global financial system. our priorities include the development of a small number of high - level climate scenarios that can be used in future system - wide stress tests. 4 next month, the pra will require insurers, as part of market - wide stress tests, to consider how their businesses would be affected in different climate risk scenarios. by adapting our soft infrastructure in these ways, the bank will help ensure that the financial system is not only resilient to climate - related risks but also can take full advantage of the enormous opportunities in a new low carbon economy. applying new technologies to increase resilience my final example of how the bank is building a platform for fintech innovation, considers how general purpose technologies, including advanced analytics such as ai, can increase the resilience of the financial system. as much of life moves online, a trail of data is created. indeed, more data was created in the past two years than in all the years that came before. 5 and this data is creating enormous opportunities for the new finance to serve customers better and to manage risks more effectively. to those ends, the financial sector is investing heavily in the cloud, machine learning and ai. banking is already the second biggest global spender on ai systems ( after retail ) and is expected to invest a further $ 10bn on ai by 2020. ai - enabled solutions are increasingly important in fraud detection