dollar increase in house prices, the increase in debt - financed consumption rose by 25 to 30 cents. the wealth effect of asset price increases, thus, seemed to be much more significant than what was perceived earlier by the policy makers. correction in asset prices, thus, led to an intense deleveraging process. assets prices and leverage represent two important variables that must be constantly monitored, as risk from both of them to the financial system could be significant. deterioration in credit standards the deterioration in credit standards facilitated by the sustained easy monetary policy stance and deregulation induced opportunity for shifting of credit risk through securitisation, contributed to growth in credit to sub - prime segments. it is often argued that easy access to liquidity alone could not have led to deterioration in credit standards. securitisation and innovations linked to such securities opened up the option to shift credit risk in sub - prime loans to the markets and thereby free the pressure on banks ’ capital, which in turn led to the significant weakening in standards for credit assessment. emergence of shadow banks – and the tendency to circumvent regulations many leading international banks started / sponsored off - balance sheet structured investment vehicles ( sivs ) to freely undertake activities which were not possible otherwise because of regulatory norms for banks, like capital adequacy and management of liquidity risks. the sivs, in turn, faced no such constraints, and could borrow freely from the short - term asset backed commercial paper ( abcp ) market and take large leveraged positions in papers like cdos / clos whose valuation and liquidity were most unknown. in the pre - crisis period, these sivs or shadow banks generated good profits for the sponsoring banks. once the crisis started, the sponsoring banks had to take the losses of the sivs. the tendency to circumvent regulation but still do something that is perfectly legal ( like sponsoring sivs to undertake certain activities ) suggests that regulation alone cannot address all sources of risks to the financial systems. financial innovations earlier, it was not easy to securitise any type of loan, like sub - prime loans, and create a market for them. the financial engineers of the wall street, however, found the answer in two things : first, by creating information asymmetry by converting the pool of difficult to market loans into collateralised debt obligations ( cdos ), and second, creating market for different tranches based on “ ratings ”. thus, a “ aaa ” rated cdo could

, and higher average net income growth. 4 the city uk, key facts about uk - based financial and related professional services ( april 2017 ). available at : https : / / www. thecityuk. com / assets / 2017 / reports - pdf / 54c0ebf2b5 / uk - key - facts - 2017 - updated. pdf empowering productivity : harnessing the talents of women in financial services ( june 2015 ). available at : https : / / uk. virginmoney. com / virgin / assets / pdf / virgin - money - empowering - productivity - report. pdf mckinsey & company, diversity matters ( february 2015 ). available a : https : / / assets. mckinsey. com / ~ / media / 857f440109aa4d13a54d9c496d86ed58. ashx credit suisse, gender diversity and corporate performance ( july 2012 ). available at : https : / / www. creditsuisse. com / corporate / en / media / news / articles / media - releases / 2012 / 07 / en / 42035. html all speeches are available online at www. bankofengland. co. uk / news / speeches the bank of england values diversity for three reasons. first, it is the right thing to do ; a public institution should reflect the people it serves. second, diversity can build the trust required to deliver our remits, as people are more likely to trust people they recognise, reducing misperceptions that we are experts making esoteric decisions in ivory towers for the benefit of others. 5 third, diversity leads to better decision - making, more creative thinking and reduces the risks of groupthink and bias. 6 this last point is critical. almost all decisions in finance are taken under uncertainty, making it especially important that decision makers are exposed to a range of views, and engage in open debates with people whose perspectives challenge the prevailing wisdom. articulating why diversity and inclusion are important has helped the bank move the dial. when i joined the bank, only 17 % of senior managers were women, so we set an ambitious target to reach 35 % by 2020. the bank is on track to achieve this : today, 32 % of senior management are female, considerably above the 14 % industry average. our pipeline of future leaders also looks healthy : 46 % of colleagues below senior management are women. this didn ’ t just happen.