too low. the main argument of late has been whether our recent proposals on capital buffers for the largest banks operating in uk markets have diverged from previous post - crisis commitments on the level of capital banks should maintain both in going concern, and the overall level of loss absorbency available amongst the liabilities of a bank to enable a resolution to occur if needed. to put it into context, the capital standard we have developed is based on the last quarter century of bank performance – including the financial crisis – such that the probability of bank failure during that period would have been extremely low. in aggregate terms we have not diverged, and if anything our recent proposals put the level a little higher than that suggested, for instance, by the independent commission on banking, but not by enough to make a big point of it. it is true that within that aggregate we have introduced a new element in the form of incentives to protect the stability of the financial system. we have followed through wherever possible on the principle that larger and more complex banks should have higher capital buffers because they pose a greater risk to the stability of the financial system. consistent with that principle, we have created a tiered system of increasing capital requirements but left the topmost tier unpopulated. this empty tier is not a product of a craven fear of putting a bank there, but rather to create a disincentive to further complexity. so, we don ’ t see this element of the design as contradicting its goal. we could argue about the merits of small changes in the capital standard, but that is not in my view a worthwhile exercise. what is more notable is the divide between this view of strengthening banks ’ loss absorbency and the alternative view that the answer lies in a radical restructuring of the banking system to require banks to have loss absorbency which would be a substantial part ( say 20 % to 30 % ) of their total balance sheet 2. it is wrong in my view to conflate an argument about small differences in capital buffers with one that is all about a different financial system. i want to spend a few minutes on this alternative view, on what it would mean, and why it is advocated. to be clear, i am not commenting as a supporter, but rather to try to cast light on this big issue. the essence of the argument as i see it is that it is asserted by supporters of, let ’ s call it the “ big equity ” school, that we cannot

unemployment debates ” ( no. 173 ), greenwood publishing group. bis central bankers ’ speeches appendix chart 1 : unemployment rate and projections chart 2 : cumulative employee growth by skill level cumulative increase since 2010q1, thousands unemployment rate, % 16 + unemployment rate february 09 ir projection february 14 ir projection 1, 800 highly skilled 1, 600 medium skilled 1, 400 low skilled 1, 200 total 1, 000 - 200 source : ons and bank calculations source : ons and bank calculations chart 3 : percent of 18 – 24 year olds not in employment, education or training chart 4 : nominal and real total pay growth per cent real pay growth total nominal pay growth - 400 per cent yoy - 2 - 4 - 6 2010 q2 2011 source : ons labour force survey bis central bankers ’ speeches - 8 - 10 source : ons and bank calculations chart 5 : percentage of people in employment who would like to work longer hours per cent chart 6 : percentage of people in employment on a zero hours contract per cent source : ons labour force survey notes : responses to the labour force survey can be affected by respondents recognising the term “ zero - hours contract ”. it is not possible to say how much of this increase is due to greater recognition of the term. chart 7 : fall in the labour share since 2009 per cent 60 % 55 % 50 % 2000 2001 2003 2005 2007 2008 2010 2012 2014 45 % bis central bankers ’ speeches - 12 % duration ( years ) depth ( % ) recovery ( % ) total change over seven years ( % ) bis central bankers ’ speeches financial and insurance activities transportation and storage electricity, gas, steam and air conditioning supply other service activities manufacturing agriculture, forestry and fishing information and communication mining and quarrying wholesale and retail trade ; repair of motor vehicles and motorcycles public administration and defence ; compulsory social security real estate activities education administrative and support service activities arts, entertainment and recreation accommodation and food service activities water supply ; sewerage, waste management and remediation activities construction human health and social work activities professional, scientific and technical activities chart 8 : median real pay decline by sector since 2009 per cent 0 % - 2 % - 4 % - 6 % - 8 % - 10 % table 1 : comparison of major earnings crises in uk history - 10 12. 8 1874 – 78 - 1. 7 0. 6 1921 – 23 - 8. 2 4. 5 1976 – 77 - 6. 6 14. 5 2007 – 14 - 7. 9 n / a