expectations of returns have adjusted downwards to a low for long environment, target returns on bank equity will adjust accordingly, though there is no evidence of this happening so far. we should expect, even if only for a transitional period if expectations of returns do adjust, greater pressure on banks to search for yield and move further out on the risk curve. to the extent that they cannot meet target returns, it will be harder for them to accrete capital to build resilience. although the nim effect has been present for some years now, we have not yet seen a broadly based move by banks in advanced economies to push up returns by taking on greater risk. post crisis regulation has almost certainly played a role in constraining aggressive search for yield behaviour, as perhaps have banks ’ memories of the crisis. 8 for example, using the data for banks from 47 countries from 2005 to 2013, claessens et al ( 2018 ) find that a 1 pp fall in interest rates implies an 8 bps lower nim – compared to 20bps at low rates. 9 in the euro area, nims are very low at around 130bps and retail - focused german savings banks in particular have seen their nims fall by 40bps since the ecb introduced negative rates in 2014. in the united kingdom, nims are higher at around 230bps and have remained relatively stable over the past few years, supported by higher policy rates and the more international focus of major uk banks. 10 low current and expected profitability appears to be the main driver of banks ’ equity prices. there is little evidence that investors are concerned about asset quality : the proportion of banks ’ loans that are non - performing and credit default swap premia remain low. all speeches are available online at www. bankofengland. co. uk / news / speeches but more recently we started seeing some evidence of search for yield behaviour. one notable example of this is the growth of corporate leveraged lending in many jurisdictions. the bank estimates that the global stock of leveraged loans has now reached an all - time high of us $ 3. 4 trillion, equivalent to 11 % of total advanced economy credit to nonfinancial corporates. the share of corporate debt owed by highly leveraged companies is now very close to or above pre - crisis levels in major advanced economies. 11 the growth of this market has been accompanied by a marked easing of underwriting standards and compensation for risk. the share of new leveraged

pressure of demand on inflation in any one single measure, particularly in an open economy like the uk where both domestic and international factors have a bearing on the rate of increase in costs and prices. chart 10 survey measure of businesses ’ price expectations balance of respondents expecting higher prices, bcc survey manufacturing services - 10 - 20 - 30 source : british chamber of commerce see sentance ( 2011 ) for example. for example, orphanides and williams ( 2005 ) argue that changes in the unemployment rate provide a better guide to demand pressure than the level of unemployment because of uncertainty about the equilibrium rate of unemployment. bis central bankers ’ speeches what we can observe more clearly is how the pricing intentions of businesses and the rate of price increases they are able to secure are responding to changes in the demand climate. and this evidence does not seem to support the view that the pressure of demand is bearing down heavily on inflation at present in the uk, even when allowance is made for cost increases. chart 10 shows a survey - based measure of pricing intentions from the surveys conducted by chambers of commerce around the uk. this shows that expected price increases are currently running at relatively high levels in both manufacturing and services, and that there has been a significant turnaround in the pricing climate since the trough of the recession in 2009. another indicator which suggests that domestic demand pressures are exerting limited downward pressure on inflation at present is the rate of inflation in the services sector. in contrast to goods – which tend to be traded internationally – the services sector is more heavily oriented towards the domestic market. so if the margin of domestic spare capacity or weak demand in the uk economy is pushing down on inflation, we should see this reflected more clearly in measures of services sector inflation. chart 11 resilient services inflation in uk annual percentage change in consumer and producer prices consumer prices producer prices - 1 source : ons instead, as chart 11 shows, services inflation – whether measured by the prices charged by firms or the prices faced by consumers – has been remarkably resilient. after a short dip in the aftermath of the recession, price increases – whether measured by consumer prices or producer prices have returned relatively quickly to the levels we saw in the mid - 2000s. and if we look at the services component of the consumer prices index, this 3 – 4 % level rate of inflation has been a fairly consistent feature in the decade prior to the recession. there is not much evidence here of spare capacity and weak demand pushing down on services inflation. and whereas relatively high