. 2 notional value of over - the - counter and exchange - traded derivatives ( outstanding amounts in billions of us dollars ; end of year data ) 800. 000 exchange - traded otc 600. 000 total 400. 000 200. 000 source : bis quarterly review, march 2013. ( 1 ) otc derivatives include credit default swaps. ( 2 ) data as of june for 2012. bis central bankers ’ speeches fig. 3 gross stocks of foreign financial assets and liabilities in percent of gdp ( sum of financial assets and liabilities in per cent of gdp ) industrial countries emerging countries 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 source : our calculations based on lane and milesi - ferretti database. ( 1 ) for each group, weighted average calculated using gdp weights. fig. 4 size of capital markets in selected emerging regions ( ratios to gdp ) bank credit to the private sector domestic debt securities issued by the private sector stock market capitalization 3. 0 cee countries ( 1 ) emerging asia ( 1 ) 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 sources : our calculations based on data from bis, imf, national statistics and datastream. ( 1 ) for each group, weighted average calculated using ppp shares of world gdp ; ( 2 ) bulgaria, czech republic, estonia, hungary, latvia, lithuania, poland, romania, slovakia and slovenia ; ( 3 ) china, hong kong, india, indonesia, korea, malaysia, philippines, singapore, taiwan and thailand. bis central bankers ’ speeches fig. 5 ceecs : international capital inflows ( 2003 - 2008 average ) ( as a percentage of gdp ) fdi portfolio investment other investment - 5 bulgaria czech republic estonia hungary latvia lithuania poland romania slovak republic slovenia cee _ 10 all emerging countries source : our calculations on data from imf weo database and national statistics. for groups, weighted average calculated using gdp weights. fig. 6 ceecs : changes in international assets and liabilities versus real per capita gdp growth estonia changes in international assets and liabilities ( 1998 / 2007 ; percentage points of gdp ) slovenia latvia bulgaria lithuania hungary romania slovak republic poland czech republic real per capita gdp growth ( 1999 - 2008 average ; annual percentage changes ) source : our calculations based on eurostat and lane and miles - ferretti database. bis central bankers ’ speeches fig. 7

dynamics. in some instances, in fact, circumvention of the prudential intervention through direct cross - border financing and / or lending from unregulated, non - bank financial intermediaries proved to be a major issue ; this was the case with direct limits on credit growth. a more effective role in containing systemic financial risks was played by measures specifically devised to build liquidity and loss - absorbing capital buffers, such as reserve and capital requirements. and when they were appropriately formulated, prudential regulations helped to curb the growth of foreign exchange loans and to keep default rates lower during the crisis. lessons learnt from the global crisis : in search of better regulation global financial deepening and international integration have resulted in greater risk sharing and made finance accessible to more countries, households and firms, thus proving instrumental in broadening economic development. but an interlinked and more closely connected financial system heightens the risks of contagion. most importantly, the crisis has shown that market participants were not capable of mastering the inherent complexity of the system that they themselves had developed. and it has highlighted the shortcomings of the idea that self - regulation and market discipline are sufficient to ensure stable financial systems. in this regard, accepting the concept of benign neglect was a critical mistake on the part of regulators. rather, financial regulation and supervision have to keep pace with developments in the financial industry. moreover, national authorities need to be aware of the risk that their powers may become narrow compared to the sphere of influence of the global financial players. the coordination of financial supervision across countries and across sectors is a key condition for the stability of the global financial system. 7 a major effort is required at the national but especially at the international level to strengthen the regulatory and supervisory framework. at the international level, under the political impulse of the g - 20, the financial stability board ( fsb ) and the basel committee on banking supervision have introduced substantial regulatory changes to prevent new financial crises and enhance the resilience of economic systems. much has been already achieved. the quantity of capital that banks need to hold has been significantly increased and the quality enhanced, in order to ensure that they operate on a safe and sound basis. international standards for bank liquidity and funding have also been instituted to promote the resilience of banks to liquidity shocks. initiatives have been taken to strengthen the for an analysis, see my lecture : “ the financial sector after the crisis ”, imperial business insights - imperial college,