to adjust their business models to the environment. banks should not use monetary policy as an excuse not to make the necessary effort to change their business models and become more profitable. the central bank of central banks, the bank for international settlements ( bis ), also warns that central bankers are repeating the mistakes of the start of this century when loose monetary policy contributed to a credit and housing boom which then collapsed and gave rise to the financial crisis. 5 / 6 bis central bankers'speeches it ’ s the bis ’ s duty to issue warnings, and we take its advice seriously. today, we monitor risks in the financial system in much more detail than before the crisis, as shown for example by our biannual financial stability review. second, we now have new tools under european law – particularly macroprudential instruments. and third, banks are much less leveraged today, thanks to the new regulatory constraints. history teaches us that, always and everywhere, asset price bubbles were accompanied by high leverage. that is not the case now, because banks ’ balance sheets are smaller. that reduces the amount of risk in the financial system. where we need to be particularly vigilant is with regard to market - based finance, also known as shadow banking. we need to gather the right information and we may need new instruments to make sure that the next big crisis does not come from the shadow banking system. 6 / 6 bis central bankers'speeches

in the field of economics and finance, outcomes are shaped by human behaviour – which, contrary to fundamental assumptions, is not always rational. in addition, economic systems are reflexive, in the sense that beliefs about what will happen often influence what does happen. going forward, as the global landscape and expectations of economic agents adjust to, as yet, an unknown new normal, the demands on the timeliness and quality of data and analysis will only increase further. in addition, an economic or financial crisis often would prompt a rethink of our approach to policy - making and of relevance, a re - evaluation of the statistics we use as the basis for our decisions. in this regard, the recent global financial crisis is no different. allow me to highlight two lessons from the recent financial crisis. first, the crisis highlighted that our understanding of the financial system was insufficient. financial innovation had resulted in a significant increase in financial intermediation taking place outside the regulated banking sector – what is today known as shadow banking. excessive risk - taking and leverage, by both regulated and shadow financial institutions, had significantly increased the vulnerabilities in the financial system. focus on the stability of bis central bankers ’ speeches individual institutions alone was not sufficient. instead, attention is required on the stability of the financial system as a whole. these underscore the importance of improving data coverage to keep pace with the constantly evolving economic and financial landscape. second, the unprecedented scale and scope of the crisis demonstrated that the interplay between exposures in the regulated financial system, the unregulated shadow banking system and the real economy can have interrelated implications. financial imbalances – in the form of excessive leverage and asset price bubbles – had built up amid stable inflation prior to the crisis. consequently, the long drawn out process of deleveraging and balance sheet repair by financial institutions, households and governments have suppressed aggregate demand amid less effective expansionary policies. in hindsight, more micro - data would have detected increasing systemic vulnerabilities in the residential property market, as well as increasing exposures among economic agents throughout the economy. to this end, more granular data would overcome the limitations of aggregated data in detecting vulnerabilities that are concentrated in selected segments of the economy and financial system. while these challenges in totality may appear to be rather daunting, i strongly believe they are surmountable, especially with greater collaboration amongst statisticians, compilers and end - users of data