stylish regulation speech given by sam woods, deputy governor for prudential regulation and chief executive officer, prudential regulation authority at the ubs financial institutions conference, lausanne thursday 16 may 2019 all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx i met recently with the head of a large foreign bank, who was in london following a visit to the continent. he had been advised by some of our eu colleagues that with the departure of the uk from the eu, the british public would become alarmed at the size of the financial sector relative to the size of the economy and would therefore demand ever - tougher financial regulation in order to assuage their sense of unease. thus it was put to him that it would be sensible for him to move more of his operations to paris, frankfurt or dublin, where things would be easier. a noisy pro - brexit demonstration taking place in the next door street seemed to support his case. but i told him that i thought it somewhat unlikely that the public would take much interest in the size of the financial sector unless it blew up again, and that ten years on from the financial crisis we have largely implemented the reforms and are moving into more of a business - as - usual phase. i said that we more often heard the opposite concern from eu officials in the context of brexit – that having escaped the “ shackles ” of eu regulation we would embark on a course of weakening financial regulation in a way that makes the financial system less resilient. this, needless to say, would be anathema to the prudential regulation authority and to all of us who have spent the last decade repairing the financial system. so as far as the stringency of financial regulation goes, we at the bank have a clear view of what would make sense for the uk in a post - brexit environment : we should keep it calibrated roughly where it is now and have no desire whatsoever to weaken it. and despite inevitable tensions between regulator and regulated, my impression is that at the most senior levels most of the people running banks and insurance companies in the uk today would agree with that position, and that it also has support in the government and parliament. we need to keep pace with new developments and continually patch any weak parts of the regulatory system, but overall following 10 years of wrenching reform we should let the new architecture do its job.

##test. this is not altogether surprising. crisis - induced recessions are deeper and longer, on average taking up to three years to return to their pre - crisis peak ( chart 2 ). some take longer still. following the great depression, uk gdp only recovered its pre - crisis level after 5 years. the us recovered its pre - crisis level after 7 years ( chart 3 ). having reached this point, the us economy then lurched downwards again in 1937 ; it double - dipped. roosevelt had been wrong in 1933. with hindsight, there had been plenty to fear. as in 1933, the fear factor is rife in today ’ s financial markets. the prompt has been sovereign debt concerns in parts of europe and the united states. this is but the latest – and most severe – in a series of waves in sentiment since the onset of the crisis. risk appetite has yo - yoed. in the language of the market, it has alternated between periods of “ risk on ” and “ risk off ”. having been indecisive, financial markets are now not so sure. that is reflected in surveyed measures of market participants ’ risk appetite ( chart 4 ). these were at above - average levels between 2005 and 2007 at the height of the boom. during 2008, risk appetite dramatically tailed - off. at its low - point in early 2009, it was more than two bis central bankers ’ speeches standard deviations below normal. since then it has ebbed ( risk off ) and flowed ( risk on ). today, it is around one standard deviation below normal and falling. risk is “ off ”. market metrics corroborate this story of acute risk aversion. the demand for safe assets has risen significantly. at a 10 - year maturity, us government benchmark bond yields are at around their lowest levels in over two centuries ( chart 5 ) – despite the recent scare over us debt ceilings and subsequent downgrade. long - term uk bond yields are also close to historic lows, as are investment grade corporate bond yields. the price of gold has risen even more dramatically. real gold prices have more than doubled since 2008, edging towards their previous high - water mark after the oil price shocks of the late 1970s ( chart 6 ). safe - haven flows to the swiss franc have boosted its value by over 30 % against both the euro and the dollar since september 2008. the reach - for - return, familiar at times in the past, has flipped