in any detail. bis central bankers ’ speeches in conclusion, the challenge for policy makers is to understand and attempt to appropriately regulate the evolving financial services landscape, while at the same time balancing oftencompeting objectives of competition and choice, financial stability, and the effectiveness of macroeconomic policies. we remain vigilant and alive to these challenges, just as we expect a similar attitude from our regulated firms. to state this is easy, to deliver more difficult. i wish you all well in your endeavours in navigating this phase of technological innovation in financial services. acknowledgements : i thank anna lalor, anne - marie mckiernan and ed sibley for their inputs into this speech bis central bankers ’ speeches

and further evolution is required. in the same way that the financial system as a whole and its component parts continues to change, so the regulatory regime needs to adapt and evolve. however, significant easing should be resisted. ‘ complexity theory ’ may provide a useful metaphor in this regard 10. the essence of complexity theory is that rather than view the system as in equilibrium, it views the economy as a complex adaptive system perpetually constructing itself. and in this context, it is worth asking why have we got to this circumstance, and how the system will continue to reconstruct itself, either by accident or design? if we look back to the ‘ light touch ’ regulation of yesteryear, while there was an extensive rulebook, there was a catastrophic over reliance on banks, their management and the market as whole to act in a certain way that would avoid the build - up of undue risk. as an aside, one could argue about whether banks ’ behaviour was actually rational or not, given the implicit taxpayer support. roll forward 10 years and there is now a very heavy reliance on rules, thousands upon thousands of pages of rules. the construction of today ’ s system has, therefore, clearly been driven by the lessons of these last 10 years. regulation has been successful in improving the safety and soundness of banks, governance and risk management arrangements, and reducing ( but not yet removing ) contingent taxpayer liabilities connected with failure. regulation has also driven greater transparency, disclosure and consistency in product design and literature, and some enhancements in suitability assessments. moreover, these drivers should not be viewed in isolation. for example, the current macrofinancial environment outlined above, masks how certain regulatory changes will really alter firms ’ incentives over the medium term. our ability to fully assess the resilience and effectiveness of basel iii developments such as the liquidity coverage ratio ( lcr ), net stable funding ratio ( nsfr ) and high quality liquid assets 4 / 7 bis central bankers'speeches ( hqla ) for example, or indeed liquidity risk in the non - bank sector, will really only become apparent when there is a normalisation in the monetary environment. 11 culture nonetheless, i would strongly argue that the enhanced regulatory environment has made the banking system safer, particularly from a prudential strength perspective. however, there is a common failure at both ends of this spectrum. neither has delivered an appropriate culture. leading up to the onset of the crisis, the prevailing culture in the banking system