unintended effects the reforms are having, as well as being alert to new risks that emerge. we will consider making adjustments to regulations in response to unintended consequences and new risks to ensure that the resilience we injected into the banking system post - crisis stands the test of time. or put in the words of the young tancredi in the novel the leopard by giuseppe di lampedusa, “ if we want things to stay as they are, things will have to change ”. thank you. https : / / en. wikipedia. org / wiki / the _ leopard. all speeches are available online at www. bankofengland. co. uk / speeches box 1 : the effect of the leverage ratio on over - the - counter derivatives as part of the evaluation of the effects of post - crisis reforms on incentives to centrally clear over - thecounter ( otc ) derivatives, bank staff have undertaken research on the impact of the leverage ratio on client cleared derivatives ( acosta - smith, ferrara, rodriguez - tous ( 2018 ) ). following the global financial crisis, the basel committee introduced a leverage ratio requirement : a bank ’ s tier 1 capital to total exposures cannot be less than 3 %. the uk introduced a minimum requirement in january 2016 for the largest seven deposit - takers in the uk. at the same time, with the aim to reduce systemic risk, regulators also supported a shift towards central clearing in derivative markets, where central clearing refers to the clearing and settlement of otc derivative trades through a central counterparty ( ccp ). to support this shift, mandatory clearing for the most liquid forms of otc derivatives was introduced. this meant an entity engaging in these trades and subject to the mandatory clearing requirement would need either to become a clearing member of a ccp or form a clearing relationship with a clearing member. in the latter case, the clearing member would then clear the derivative transaction through a ccp on behalf of its client – hence the term ‘ client clearing ’. the number of clients clearing otc derivatives has increased significantly in recent years, as chart a illustrates. the interaction between client clearing and the leverage ratio arises in two ways. first, the leverage ratio includes exposure arising from potential future exposure on derivatives. however, initial margin posted by clients is not recognised as reducing exposures by the leverage ratio calculation. second, if it appears on the clearing member ’ s balance sheet, client margin increases the leverage ratio exposure. thus

banks and commercial banks. it aims to address the typical pain points of low efficiency and high cost in cross - border payments. with rmb being one of the cbdcs used on mbridge, this provides another opportunity to allow the easier use of rmb in cross - border payment, and hong kong as an offshore hub stands to benefit from its success. the project has entered the minimum viable product ( mvp ) stage, and we encourage banks in hong kong to work with their business partners to make good use of this platform for efficient cross - border payments. outreach before i conclude, let me briefly discuss the significance of outreach efforts to promote hong kong's rmb hub. by outreach i am referring to engagement with stakeholders in and outside of hong kong. locally, the tma is an important partner that, over the years, has provided strong support and useful advice to the hkma in building our rmb hub, from the administration of cnh fixing to serving as a useful channel for the hkma to reach out to market participants for feedback and ideas to keep improving our rmb platform and enhancing its competitiveness. thank you, tma. i must also thank our colleagues and friends in the banking industry for their contribution to our outreach work overseas that covered asean and middle east countries. through their active participation and engagement with the official and financial sectors in those countries, we have enhanced the understanding and raised the interest of our counterparts in the benefits and potential in the wider use of rmb in their trading and investment activities. the interaction has also provided a good basis for us at the hkma to map out more concrete work plans to overcome the inertia and bottlenecks in the transactions involving rmb and their respective local currencies. we expect outreach of this kind to be a continuing effort going forward. conclusion ladies and gentlemen, mindful that i am the only obstacle standing between you and your well - deserved lunch, i'd better stop here. let me return to where we started : the olympics, and conclude with its very motto – faster, higher, stronger – in the context of our offshore rmb business. faster in rolling out new products, higher in the various turnover numbers, and stronger as we continue to lead. with that, thank you very much. 4 / 4 bis - central bankers'speeches