over a century or more. kindleberger's study of the 1873 panic affecting berlin, new york and vienna is a good illustration of this6. the contemporary shift in the balance of intermediation towards non - banks makes such risks more pressing, but it should not be thought of as new. that's message three. the non - bank word and its interaction with the banking world – money and finance as minsky put it – has evolved in ways that require us to look not just at regulation, but at two additional key components of our response as authorities, namely the tools of surveillance and the tools of remedy. i will start with surveillance. the non - bank sector is very large and growing. it is disparate in nature, opaque in important places and the interlinkages are, unsurprisingly, therefore complex and hard to observe. in the banking sector we have developed post - crisis our stress testing tools. at their core, these are institution specific, though to leave it there would be a mistake and so we have developed cross - sector tools to capture system - wide risks. for example, where the actions of individual banks to restrict credit lead to a collectively worse outcome for the system. for the non - bank sector and its interaction with the bank sector we have to focus on stress exercises that simulate the spread of stress and thereby seek to pick out the institutional points of weakness and lack of resilience, for instance in markets and infrastructures as well as the firms themselves. i think this is very much in the spirit of minsky. at the bank of england we are conducting our first system wide exploratory scenario. it doesn't claim to cover every risk in the system, you should be disbelieving if i said otherwise. it is more in the way of a flow test – simulate shocks, let them flow through the system and see what happens. we expect to report on the results by the end of this year. message four is that we need to develop more of these tools of surveillance of risks. you will i am sure be pleased to know that my fifth point is the last. it covers the tools of response that authorities use in a crisis. as i noted earlier, harold james has set out how surviving such crises requires extraordinary measures to solve short - run situations and alleviate long - run problems, but on their own such approaches may not be compatible with long - run stability. this can sound like an impasse,

money which ensures that central bank and commercial bank money are fully aligned in nominal ( and real ) value terms. in normal times, that should take care of the needs of the non - bank sector because the liquidity should reach where it is needed via banks. but in times of stress it may not. to avoid a systemic crisis, and reflecting the growth of the non - bank sector, central banks should consider permanent emergency facilities for non - banks. but these should not be standing facilities, because the value of money is not the issue here. non - banks cannot decide when they would like access to the central bank. rather the central bank can trigger or activate these facilities if it senses stressed conditions and their possible economic consequences warrant such action. but these facilities are temporary in their availability and should be unwound and repaid as soon as possible. i think this deals with harold james's point about short and long - run consistency. you may already be aware that at the bank of england this is what we are doing, by putting into place emergency facilities for a range of non - banks which we consider exposed to the systemic risks that should call the use of such facilities into action. but to reiterate, these are not standing facilities of the traditional sort. minsky's analysis is pertinent today as memories of the global financial crises recede and the discussion moves on to putting more emphasis on growth and competition in economies and the role of finance in these objectives. to be clear, these objectives are important, no doubt about that. but we have learned from hard experience that we can only achieve them with a foundation of financial stability. there isn't a trade - off. the best contribution we as financial stability policymakers can make to sustainable economic growth is to ensure that the financial system is resilient when shocks hit. that foundation requires confidence in the nominal value of money and therefore it's singleness. money and finance are different and should be treated as such. profits and 4 / 5 bis - central bankers'speeches some losses should be made as the normal state of affairs. we should not use regulation to limit these outcomes beyond enabling efficient markets with strong institutional foundations and well - established rules of the game. but as authorities, it is our job to intervene to prevent damage to the foundations of financial stability which could in turn compromise economic growth. those interventions can be continuous in the sense of regulations or emergency and temporary where the threat is so great and costly that it