. currency and commodity markets affect the prices we pay when we go shopping, and the cost of changing money when we go on holiday. ficc markets also affect the ease with which employers can raise finance, which in turn affects their very viability, the level of their investment, and potentially the structure of our economy. far from being otherworldly, these markets really matter to us all. the pall of misconduct in fixed income currency and commodity markets the shadow of the worst financial crisis in living memory has been significantly lengthened by a series of appalling cases of misconduct in fixed income, currency, commodity and other markets. details of these began to emerge relatively late in the crisis, but they have proved surprisingly prevalent and persistent. and they have further eroded the trust of the general public in financial markets. public outrage is based on the view that the rewards in finance are disproportionate and that the system is rigged. when people read of malpractice in financial markets, of trading profits being claimed through manipulation, collusion or dishonesty, they naturally wonder if they are one of the people who have been wronged. in fixed income, employees in firms around the world attempted to manipulate libor, euribor and other similar measures of short - term borrowing costs in order to benefit themselves or some other part of their firm ’ s business. in the united states and elsewhere, firms structured the mortgages or other assets used to back securitised assets, or misrepresented the nature of those underlying assets, in ways inconsistent with the interests of end investors. regulators identified systematic attempts to mis - value and otherwise engage in market misconduct in relation to large scale positions in credit default swaps. in commodities markets, traders were found trying to manipulate physical or derivative prices, including those of gold, oil, lead, platinum, palladium and coffee. and investigations of further cases and criminal actions, in foreign exchange and other markets, remain ongoing. some of the cases already brought by colleagues at the financial conduct authority have resulted in the publication of truly shocking evidence about the behaviour by some individuals in these markets. what particularly struck me in reading some of that evidence was how casual their attitude appeared to be towards the abuses they perpetrated. in one example, a trader mentioned to his manager that he had asked a colleague to lower the firm ’ s yen libor submission, adding that “ every little helps … it ’ s like tescos.

a period of sustained and very powerful pressure on house prices in the uk. the extent to which that will jeopardise financial stability depends on whether that pressure actually results in more transactions at higher prices, whether that in turn leads to an increase in household indebtedness and where that debt is concentrated. these are, of course, all linked. the laws of supply and demand must, in the end, apply also to housing even in the uk. house prices cannot grow faster than earnings indefinitely. while households may be prepared to spend an increasing amount of their income on housing, there is a level at which house prices are simply not affordable. ultimately – given purchases are in the main financed by long term mortgage lending – it is the price and availability of mortgage credit, including maximum loan - to - value and loan - toincome ratios, offered by lenders that determines the point at which affordability constraints bite on house purchasers and so how far they can stretch to match rising prices. at present, affordability constraints do not seem to be having a braking effect on the rise in prices. but prices are still below their 2007 levels in most regions and the house - price - toearnings ratios a multiple below its pre - crisis peak. if prices continue to grow faster than earnings, affordability will increasingly be an issue for purchasers and for lenders. the proportion of loans at high loan - to - income multiples has already gone through pre - crisis levels in london. when that has happened in previous episodes of a sharply rising housing market in the uk, lenders relaxed lending standards as house prices – and so the value of the asset they were lending against – rose. expectations of future price increases also probably played a role in this. the fsa ’ s 2009 mortgage market review sought to reinforce lenders ’ standards and the reforms recommended by the review were brought into force this month. they should help to ensure that affordability constraints do act against pressures on house prices. but they have not yet been tested. bis central bankers ’ speeches a key determinant of whether a loan is affordable is the level of interest rates over time, which determine the cost of servicing those debts. the substantial falls in mortgage rates over the past twenty years – with the move to a lower inflation environment in the late 1990s and later, through the late 2000s, as bank rate was cut to combat weak demand – have been associated with a large increase in both house prices relative to earnings and