which savings - investment imbalances, the growth of complex securitised credit intermediation, changing patterns of maturity transformation, rising embedded leverage, a burgeoning shadow banking sector, and rapid credit - fuelled growth, had created large systemic vulnerabilities. in the future, we need – at national and global level – to be in a much better position to understand and address trends in credit growth, in system - wide leverage and maturity transformation, and in the inter - linkages within the financial system, to identify and constrain emerging risks. for this we require additional system - wide prudential as well as other tools. creating the prudential tools, regulatory set - ups and policy tools required to better constrain system - wide risks, including generating the transparency needed for authorities and markets to be better informed about the risks to the system, is the focus of much of the reform agenda. these changes do of course need to be implemented at national levels. but there is work internationally to generate the tools and policies needed, to promote coherence in implementation and to conduct the monitoring that is required. let me speak to some of these. one central lesson of this crisis is that the system entered it with too little capital, far too small liquidity buffers, and a capital and valuation regime with significant pro - cyclical consequences. much work is underway on bank capital and liquidity that will address these issues. the basel committee proposed last year changes that by end 2010 will expand basel ii risk capture and very significantly increase trading book capital requirements. and the committee ’ s much strengthened liquidity guidelines are in the process of being implemented nationally. further work is underway to strengthen guidance for and monitoring of liquidity management at large cross - border banks. the fsf and its member bodies also produced a set of recommendations to mitigate procyclicality. these call for ( i ) regulatory capital requirements to increase the quality and level of capital in the financial system during strong economic conditions so that they can be drawn down during periods of economic and financial stress ; ( ii ) a revision of the market risk framework of basel ii to reduce the reliance on cyclical value - at - risk based capital estimates ; and ( iii ) to supplement risk - based capital requirements with a leverage ratio to contain the build up of leverage in the banking system. regarding provisioning, we – and now g20 leaders – called on the iasb and fasb to reconsider

failures has been progressively shifted from taxpayers to banks ’ stakeholders. as an intended consequence of these regulatory changes, banks have been steadily deleveraging, in particular by reducing the riskiest positions on their balance sheets. the contraction of bank intermediation has been accelerated by two factors. first, the macroeconomic environment, with its low level of interest rates and flat term structure, has put further downward pressure on banks ’ profitability. second, banks are facing increasing competition from fintech companies, which use technological innovation to offer services such as payments and asset management. even though core banking activities have not as yet been significantly affected by these new players, there are reasons to believe that fintech will in time become a more serious challenger in lending and also retail funding. 3 regulatory changes, combined with competition and the low level of interest rates, are paving the way for a contraction of the banking sector. as a result, non - bank forms of financing for the real economy need to be found. this need is particularly acute in the case of small and medium enterprises ( smes ), which are more bank - dependent than larger companies. accordingly, as the deleveraging of the banking sector began, policymakers started voicing concerns about sme financing. unfortunately, those concerns proved to be well - founded : during the crisis the deterioration in the economic outlook – together with the tightening of credit supply conditions – led to severe financial strains for smes. 4 larger firms, on the contrary, managed to weather the crisis better, partly because they enjoyed relatively easier access to capital markets, which allowed them to offset, at least in part, the decline in bank credit. cortina, j. j. and s. l. schmukler, “ the fintech revolution : a threat to global banking?, ” research & policy briefs 14, world bank, april 2018 and lumpkin s., j. mosher, “ framework for digitalization in finance, ” in oecd, financial markets, insurance and private pensions : digitalisation and finance, 2018 and panetta, f. “ fintech and banking : today and tomorrow, ” speech, 12 may 2018. ecb, “ survey on the access to finance of small and medium - sized enterprises in the euro area, ” november 2012, and rodano, g., n. serrano - velarde and g. tarantino, “ lending standards over the credit cycle, ” the review of financial studies, 31