off, there certainly has been ) some erosion of the banks ’ market share as a repository for liquid asset holdings, that erosion has generally been very gradual. in the uk, for example, bank ( and building society ) deposits still account for 42 % of personal sector liquid asset holdings against 50 % a decade ago ; the proportion would be very much higher if liquid assets included only those that are capital certain. and the vast bulk of the banks ’ liabilities remain in the form of unsecured, short - term, deposits. despite the rapid development of ( secured ) repo markets, only some 3 % of the major uk banks ’ funding ( in sterling and foreign currency together ) was secured ( from information provided last autumn ) through repo ; and the figure for all uk banks, including the business conducted in branches and subsidiaries of overseas banks, which have less direct access to deposits, was only around 8½ %. the proportion of secured funding is below 5 % for other major internationally active banks that we have looked at, with the exception of jp morgan and bankers trust - both somewhat special cases - where the proportion is very much higher ( 25 - 35 % ). and even in those special cases it is still well below that for the major us securities firms ( typically 55 - 80 % ). banks remain, too, at the heart of payments systems. payments may be made directly across bank accounts through instructions, for example, in the form of cheque or debit card ; or they may be made indirectly, through, for example, the use of credit cards, the balances on which are subsequently settled using a bank account. even where disintermediation creates new chequing facilities, as for example, in the case of money - market mutuals, these are still cleared through settlement banks. it is true that new forms of money transmission - e - money are being developed, sometimes outside the conventional banking system. but i suspect that they, too, will typically depend upon clearing through the banking system. to the extent that they come to involve the creation of what are effectively direct deposits, they will represent banking in a different form and become special, and logically subject to regulation, in much the same way as conventional bank deposits. in the payments system context, too, important progress is being made to reduce inter - bank exposures ( through the introduction of real time gross settlements systems in many countries, for example, and through the netting of foreign exchange settlements ) but

- bank financial institutions, and of the non - banking activities of banks - quite apart from micro - prudential regulation in the interests of consumer protection. it provides justification, too, for some form of consolidated prudential oversight of multifunctional financial groups and for monitoring large exposures, both intra - group and to outside counterparties. where a problem of this sort does arise, it may well justify technical central bank intervention to help contain it - for example by facilitating payments and settlements to minimise market disturbance. but, i would be very cautious about extending last resort liquidity provision to financial institutions not engaged in banking activity, and where the particular justification for it, based upon banks ’ distinctive functions and the distinctive characteristics of banks ’ balance sheets, did not clearly apply. while i do not think such intervention can, realistically, be excluded altogether, i am concerned that an unduly liberal interpretation of systemic risk would increase the scope for moral hazard and ultimately weaken the safety and soundness of the financial system as a whole. conclusion mr. chairman, my answer to your question are banks still special? is essentially that while in some respects they may be less special than they were, they remain special nonetheless. they remain special in terms of the particular functions they perform - as the repository of the economy ’ s immediately available liquidity, as the core payments mechanism, and as the principal source of non - market finance to a large part of the economy. and they remain special in terms of the particular characteristics of their balance sheets, which are necessary to perform those functions - including the mismatch between their assets and liabilities which makes banks peculiarly vulnerable to systemic risk in the traditional sense of that term. perhaps the day will come - and i do not at all exclude the possibility that other financial activity will continue increasingly to be carried on alongside banking activity, even on the same balance sheet, indeed i expect that to happen. that, in my view, does not reduce the special public interest in banking activity ; although it may well affect the appropriate substance of banking supervision ; and it certainly extends to banks ’ other, different, functional public interests, including different regulatory interests. on the other hand i am not persuaded that the special public interest in banking activity extends to non - banking financial institutions, though different functional public interests in many cases clearly do. what is absolutely clear, in a world of increasing financial integration, is that neither the financial regulators nor the central bankers among you can expect