advanced economies, including the unprecedented monetary easing, the fiscal stimulus then consolidation, the repair and resolution of the financial sector, the initiatives to reduce public and private sector indebtedness, and the consequences of the global regulatory reforms. the highly accommodative global monetary environment has generated higher global liquidity. while contributing to the resumption of credit flows, it has exacerbated the recent surges in capital inflows to emerging economies. these inflows have resulted in significant strengthening of currencies, rising asset prices, stronger credit growth, and for some, overheating conditions in the economy. these inflows have, however, been punctuated by reversals in capital flows, following deleveraging activities mainly by the banking groups in the crisis - affected countries. deleveraging by sovereigns and by households, in particular the united states, have also reinforced this trend. the deleveraging by banks was, in particular, felt in 2009, following the actions by banks in the united states to strengthen their capital positions, and more recently by banks in the europe to meet the new capital adequacy requirements. in view of the challenging conditions for capital raising, this is being achieved, in part, by asset reduction, either by asset sales, in particular in performing economies, or the withdrawal of credit lines. these operations not only have implications on asset prices but on currency movements, as funds from the asset disposal are remitted back to the home country. the reversal of capital flows following such deleveraging is thus accompanied by a correction in asset prices and depreciation in the currencies. for emerging economies, the more developed and liberalised the financial markets, the more significant will be the impact of such activities, and the greater will be the amplitude of the volatility in the asset prices and currency movements. global policy spillovers have also been transmitted to the real economy through trade and investment flows. the world economy, including emerging economies, benefitted immensely from the fiscal stimulus that supported the economic recovery. however, as the deterioration in fiscal sustainability became a concern, the effects of the pull - back in public expenditure on growth have contributed to slowing world trade and cross - border investment activity. emerging economies, in particular in asia, have seen the export sector slow significantly. bis central bankers ’ speeches while foreign direct investment continues to gravitate to emerging economies, in particular to asia, the scale of such investment activity has also

authorities the basel committee report already identifies several preliminary takeaways for supervisors, including : the importance of supervisors analysing banks ’ business models one decision, concerning a bank, was declared void by the italian council of state due to procedural matters concerning the powers of the finance minister ( at the time responsible for the final decision ). and assessing a bank ’ s governance and risk management in light of the crucial role exercised by its governance and risk management bodies ; the oversight of liquidity risk ; the treatment of interest rate risk in the banking book ; the importance of exercising supervisory judgment and reviewing the existing supervisory toolkit ; the introduction of a common definition of “ internationally active banks ”, which would be important to define those that should be fully subjected to basel committee ’ s standards. in what follows i shall focus on the supervisory and regulatory aspects of liquidity risk and on the interest rate risk in the banking book ( so - called irrbb ), referring those interested in a broader analysis to the basel committee report. in the light of the features of the recent crises, i believe that my choice to discuss liquidity does not need a motivation. on the other hand, the irrbb is typically a subject for bank analysts. it measures the possible impact of rate variations ( under specific hypothetical scenarios ) on assets and liabilities in the banking book. in the svb case, the risk ( on the asset leg ) measured under the hypothetical scenario of the irrbb framework began to materialise in 2022 due to the sudden and strong increase in interest rates, since assets were financed mainly by short duration deposits ; as a consequence, the market value of long - duration securities declined and unrealised losses materially increased. 11 this phenomenon played a key role in the confidence crisis that led to the demise of the bank. it is important also because it has affected to some extent many intermediaries worldwide ; not only banks, but also insurance companies, pension funds, etc. regarding the regulation of liquidity risk, the recent banking crises confirms that prudential requirements, i. e. the so - called liquidity coverage ratio ( lcr ) and the net stable funding ratio ( nsfr ), would have been able to detect – at least partially – the weaknesses in the liquidity profile of the us regional banks, had the latter been subjected to them. 12 at the same time, some areas of the existing regulation, defined after the great financial crisis, may deserve a fresh look in