of factors discussed later, and in any case the effects of the stock market on investment dissipated by 2004. finally, as noted in the text, if the driving force behind the changes in external balances was a decline in desired saving in the united states, world real interest rates would have risen rather than fallen. investment to fall, or both. in fact, several factors appear to have contributed to the increase in the supply of net saving from emerging - market countries. first, the financial crises that hit many asian economies in the 1990s led to significant declines in investment in those countries ( in part because of reduced confidence in domestic financial institutions ) and to changes in policies – including a resistance to currency appreciation, the determined accumulation of foreign exchange reserves, and fiscal consolidation – that had the effect of promoting current account surpluses. second, sharp increases in crude oil prices boosted oil exporters'incomes by more than those countries were able or willing to increase spending, thereby leading to higher saving and current account surpluses. finally, chinese saving rates rose rapidly ( by more even than investment rates ) ; that rise in saving was, perhaps, a result of the strong growth in incomes in the midst of an underdeveloped financial sector and a weak social safety net that increases the motivation for precautionary saving. the combined effect of these developments, i argued, raised desired saving relative to desired investment in the emerging markets, which in turn led to current account surpluses in those countries. but for the world as a whole, total saving must equal investment, and the sum of national current account balances must be zero. accordingly, in the industrial economies, realized saving rates had to fall relative to investment, and current account deficits had to emerge as counterparts to the developing countries'surpluses. this adjustment could be achieved only by declines in real interest rates ( as well as increases in asset prices ), as we observed. the effects were particularly large in the united states, perhaps because high productivity growth and deep capital markets in that country were particularly attractive to foreign capital. the global saving glut hypothesis is thus consistent with the three key facts i noted earlier. to be sure, the global saving glut was not the only factor behind the decline in long - term real interest rates since the 1990s. as i described in subsequent remarks ( bernanke, 2006 ), term premiums also declined during this period for reasons that are debated but may have included a perceived reduction in uncertainty regarding inflation and

the global financial system has weathered many storms - - the market turmoil in the fall of 1998, the preparations for y2k, devastating terrorist attacks in 2001 and a recognition of the threat of future attacks, and major accounting scandals in 2002. as i will discuss in more detail shortly, these developments have been important in shaping the international central banking policy agenda. key financial trends before exploring some of these issues in a bit more depth, it seems useful to consider some of the longer - run trends that have set the backdrop for much of the work of central banks in international forums dealing with financial efficiency and stability. one clear trend in many countries is an increase in market concentration in the banking sector and in other sectors of the financial services industry. in the united states, for example, the share of assets held by the top ten commercial banks has risen from about 30 percent in 1995 to about 45 percent today. outside the commercial banking sector, consolidation has resulted in a small number of financial firms doing much of the equity and bond underwriting throughout the world. a second trend is the steadily increasing share of total credit provided directly through markets rather than through intermediaries like banks. for example, in the united states, the share of bank loans in the total outstanding debt of domestic nonfinancial corporations has declined from about 21 percent at the end of 1990 to 12 percent at the end of last year. the growing importance of market - based finance has not, however, signaled a decline in the commercial banking industry. u. s. banks, for example, have enjoyed record profits that stem, in part, from their activities in securities markets and in the development of new instruments. indeed, banks ’ development of sophisticated risk - management techniques helped to fuel the growth of new financial instruments. more generally, by providing lines of credit and assuming other off - balance - sheet exposures, banks support the advancement and ongoing operation of financial markets and lower the costs of market - based finance for many market participants. another important trend has been the expanding scope and availability of financial instruments. the global financial system is still well short of the theoretical ideal of complete financial markets, but clearly it is moving in that direction. market participants now use an array of financial instruments that, twenty years ago, were not actively traded and, in many cases, did not even exist. the growth of derivatives is a useful example of this trend. according to the december 2003 survey of derivatives conducted by the bank for international settlements ( bis ), the