- ante by levies on banks. 23 so too have some policymakers. 24 these schemes are similar in many respects with existing deposit insurance regimes. like them, such schemes would ideally set risk - based premia and be pre - funded to ensure they were time - consistent. one potential benefit of private sector contingent capital proposals are that they allow a mutualisation of risk. this lowers the aggregate pool of capital that might be needed by the banking system. if this pool of capital is large enough to accommodate future crisis needs, private sector capital insurance may offer a better cost / risk trade - off than self - insurance. as history shows, however, this is a not inconsiderable “ if ”. further work would be needed to establish what size insurance scheme would genuinely augment the capital pool. 5. conclusion over the course of the past 800 years, the terms of trade between the state and the banks have first swung decisively one way and then the other. for the majority of this period, the state was reliant on the deep pockets of the banks to finance periodic fiscal crises. but for at least the past century the pendulum has swung back, with the state often needing to dig deep to keep crisis - prone banks afloat. events of the past two years have tested even the deep pockets of many states. in so doing, they have added momentum to the century - long pendulum swing. reversing direction will not be easy. it is likely to require a financial sector reform effort every bit as radical as followed the great depression. it is an open question whether reform efforts to date, while slowing the swing, can bring about that change of direction. references bagehot, w ( 1873 ), lombard street, a description of the money market, henry s. king and co. publishers. bank of england ( 2008 ), the development of the bank of england ’ s market operations : a consultative paper by the bank of england, available at http : / / www. bankofengland. co. uk / markets / money / publications / condococt08. pdf. barro, r. j. ( 1979 ), “ on the determination of the public debt ”, journal of political economy vol 87 ( 5 ), university of chicago press. beale, n., rand, d., arinaminpathy, n. and may, r. m ( 2009 ), conflicts between individual and systemic risk in banking and other systems,

foundations wren began in 1664. and this is the architecture of europe : a single market whose participants are interlinked, relying on and complementing each other. just as wren ’ s wooden lattice supports robert streater ’ s art, this market network supports the creativity of europe. of course, the weight of the ceiling doesn ’ t disappear but rests on hidden foundations. so too does the single market rely on invisible supports, some of which are the responsibility of the bank of england and european regulatory authorities. while these foundations have worked well thus far, they may in time need to be buttressed to realise the full creative potential of the peoples of the united kingdom and europe. bis central bankers ’ speeches charts chart 1 : uk trade is two - thirds of gdp chart 2 : uk receives largest share of eu fdi ( a ) source : oecd ( a ) eu - 15 countries ’ share of average annual fdi inflows into the eu : 1993 to latest. source : unctad. chart 3 : global activity of uk financial system unmatched in the european union … chart 4 : … and uk financial system is very large relative to gdp ( a ) notes : bars show share of global activity for cross - border lending, interest rate otc derivatives and foreign exchange and share of global assets for all other categories. cross - border bank lending and mutual fund asset data are from 2014 ; all other data is from 2013. source : bis, city uk, imf ’ s gfsr, bank calculations. source : radcliffe report ( 1959 ), wilson report ( 1980 ), ecb, oecd, swiss national bank and bank calculations. bis central bankers ’ speeches chart 5 : foreign suppliers receive close to equal treatment to domestic firms in the uk ( a ) chart 6 : uk administrative burden on startups second lowest in g7 ( a ) source : oecd ( 2013 ), product market regulation database. source : oecd ( 2013 ), product market regulation database. chart 7 : incumbent firms least protected in uk ( a ) chart 8 : uk product market least heavily regulated in g7 ( a ) source : oecd ( 2013 ), product market regulation database. source : oecd ( 2013 ), product market regulation database. bis central bankers ’ speeches chart 9 : uk employment protection in middle of the g7 pack ( a ) … chart 10 : … while securing favourable labouremployer relations compared to japan and germany