think it would be preferable not to disturb the existence of both inside and outside money and the broad balance between them. but, this requires a number of things to happen and questions to be answered. it requires banks to be more active in thinking about digital commercial bank money and not leave it to cbdc. in any event, as we have set out in the cp, we think in this new world a central bank digital currency is likely to be needed to anchor the value of all forms of money, including new digital ones and to ensure the maximum opportunity for innovation in payments services. moving on, let me now point to an area where we are at risk of contradicting ourselves. i said that assured value was a key principle of digital money. how does this fit with the idea that we could resolve failed banks and allow deposits ( inside money ) to take a haircut? one answer is that it depends on the size of the deposit above a certain threshold. the idea behind deposit protection is to set a level below which the assurance of value holds, and above which it does not. practice, i would suggest, points to the difficulty of this principle. in seeking to solve too big to fail we have tackled this problem by requesting an additional slice of subordinated liabilities which can explicitly bear losses by being converted into equity in the event of a resolution. i'm not talking here about at1 securities, but what comes further up the hierarchy – what in europe we call'eligible liabilities '. the point is that for large banks we have reinforced the assurance of deposits by requiring a bigger cushion of loss absorbing liabilities. but smaller banks find it harder to issue marketable long - term debt securities that can count as eligible liabilities. i think the answer here lies in the world of deposit insurance. 3 / 6 bis - central bankers'speeches the us authorities have announced a review of their deposit insurance system. in the uk, the bank is also considering improvements to our approach to depositor pay - outs for smaller banks which do not have eligible liabilities. our work has thus far focused on the speed of pay - outs. going further and considering increasing deposit protection limits could have cost implications for the banking sector as a whole. as with all things relating to bank resolution, there is no free lunch. two issue areas to go. the first is a key part of how we underpin financial stability, namely how we assess and test for stress. one of the important innovations since

fund issue, the nickel metals case – namely that for firms to understand and respond to the 4 / 6 bis - central bankers'speeches full risk implications they would have had to observe and respond to a much larger picture of risks than they did observe, and from that came potentially larger risks. there is a challenge of breadth and depth in the nbfi world. it is a very large and disparate landscape with many activities and entities. as a result, we have to survey a lot of ground to look out for risks. but in order to understand these risks, we need to get into the detail, hence the depth issue. ldi was a good case study of this. the ldi fund world comprised 85 % of the larger so - called segregated funds, and 15 % of the smaller pooled funds. our stress testing work focussed on the 85 %, but the problem arose in the 15 %. in some ways the issues around nbfi bear a striking resemblance to ages old challenges in finance, such as leverage, and inter connectivity with other parts of the financial system, creating the scope for spill - overs and systemic consequences. but the heterogeneity of the landscape means that there is no single magic number for leverage as we have with banks, and the inter connectivity can be hard to map, reflecting the recent incidents. this helps to explain why at the bank of england we are conducting a system wide stress exercise involving non banks as well as banks to help us to map out the risks. this is inherently a cross - border issue. so, we must make progress internationally. this is what the financial stability board work programme is focussed on, and why it is so important. it is also crucial that individual countries take forward and implement these reforms. while the solutions are global, delivering them will necessarily be local. finally, there is an important point to pull out of a number of these issues. a common outcome of a shift in the balance from inside to outside money ( either through cbdc or banks holding larger reserves at the central bank ) or increasing the broader liquidity buffers of banks and non - banks could be to create a constraint on lending and investment in the real economy. for the uk economy this would go against the need to finance investment to support stronger potential growth, from its current weak level. this constraint would not appear if the counterfactual was an unstable financial system because solving that instability would have to be the priority. but in