##england. co. uk / news / speeches the response to the great financial crisis has been the largest, most comprehensive set of reforms to the governance of the international financial sector that we have seen. new international standards ensure that banks engaged in cross border activity are far more resilient. they have more and better quality capital to absorb losses and much greater reserves of liquidity to withstand stress. the development of resolution regimes and an international standard for loss absorbency in resolution makes it far more possible for international banks to fail without endangering the whole financial system. otc derivatives, a key amplifier of the stress and largely unregulated and unreported before the crisis, are now transparent and collateralised – an additional $ 1trillion is now held globally against all derivatives trades. a raft of measures have moved shadow banking into the light, eliminating its toxic elements and ensuring more resilient market based finance. and, perhaps most importantly, the crisis led to a reformed governance structure with the creation of the financial stability board ( fsb ), accountable to both the g20 finance ministers and governors and to the g20 leaders. the fsb brings together the central banks, regulators, and finance ministries of jurisdictions representing around 90 % of the global financial system. it has a broad mandate to promote financial stability, monitor and assess risks, and coordinate standard setting bodies to ensure no regulatory gaps. the fsb has driven the great reform programme to address the fault lines exposed by the crisis. that programme is largely complete and in its implementation phase. we cannot and do not need to be forever in a post crisis reform phase. but, looking forward, there is always the danger that we fall behind again. the progress we have made in governance since the crisis gives us the ability to prevent this from happening. we have far better institutional machinery today, through the fsb and g20 to bring governance into line with new risks and challenges before rather than after a crisis. the fsb ’ s work on cryptoassets in 2018 is a good example. the g20 identified the rapid growth of cryptoassets as a potential problem and tasked the fsb with analysing the risks posed. in the space of less than a year the fsb concluded that cryptoassets did not currently pose financial stability risks. but it also put in place a monitoring framework to ensure that this assessment is kept current and keeps pace with rapid developments in this area. the fsb also

, global banks ’ actual returns on the assets they held were pretty much flat in that period. indeed, in the uk, banks in the years immediately before the crisis, return on assets actually fell. the high returns were not fuelled by a better return on the underlying assets banks were holding. in the uk, for example, banks ’ assets grew from 20 times equity to more than 30 times equity. put simply, banks maintained and increased shareholder returns by dangerously increasing leverage and thinning their capital cushions. of course, shareholder returns collapsed when the crisis struck and risk across the system was re - priced. in the depths of the crisis, global banks ’ earned negative returns for shareholders. uk banks ’ return on equity plunged to – 10 %. today, returns on underlying assets remain lower than they were before the crisis. in 2013, global banks ’ average return on assets was 0. 3 %. for the largest uk banks, return on assets was just 0. 01 %. return on equity in the uk, the shareholders ’ return, was just 0. 3 %. today ’ s low returns both on assets and on equity reflect a number of factors. one driver of low return on assets for many banks has been the continued effect of low levels of long - term interest rates, which can drag on net interest margins. for this reason, when long - term yields fell on renewed fears about the strength of the global recovery last week, bank stocks fell disproportionately. the return to strong global economic growth that we all hope to see, and to more normal monetary policy settings should support banks ’ earnings. there have also been, unfortunately, a series of “ one - off ” effects – the necessary redress of previous episodes of misconduct. these have reduced uk banks ’ pre - tax profits from around bis central bankers ’ speeches £20 billion, to less than £10 billion during 2013. one hopes this will also be a temporary effect. but some of the effect of the new landscape will be more permanent. this is particularly true of leverage ; it will not in future be possible to drive up shareholder returns by levering up on ever thinner capital cushions. for the large uk banks, average levels of leverage have broadly halved and seem unlikely to increase materially. and that is not all of the story. another driver of low returns on assets and equity is the fact that banks ’ paybill has not adjusted to the smaller returns banks are now earning. it was not just the shareholders