banks excl. lcfis insurers hedge funds cumulative return 200 % 150 % 100 % 50 % 0 % - 50 % source : bloomberg, creditsuisse / tremont and bank calculations. ( a ) sample based on banks and insurers in s & p 500, ftse all share and dj eurostoxx indices as at march 2009. excludes firms for which returns not quoted over entire sample period. chart 8 : global banks ’ size and capital ratios ( a ) tier 1 ratio ( % ) 0. 0 0. 5 1. 0 1. 5 2. 0 total assets ( £trn ) source : bankscope ( a ) as at end 2007 due to data availability chart 9 : global banks ’ size and leverage ratios ( a ) tier 1 ratio ( % ) 0. 0 0. 3 0. 6 0. 9 1. 2 1. 5 1. 8 total assets ( £trn ) source : bankscope ( a ) as at end 2007 due to data availability chart 10 : global banks ’ size and government support ( a ) support rating 0. 0 0. 2 0. 4 0. 6 0. 8 1. 0 1. 2 1. 4 total assets ( £ trn ) source : bankscope and fitch ( a ) as at end 2006. government support proxied by fitch ’ s ‘ support rating ’. a higher number is a lower level of support.

review of its money market operations with a view to improving and simplifying them, and reducing overnight volatility in those markets. the bank ’ s markets director, paul tucker, will be consulting the market shortly. for the united kingdom as a whole, pressing on with reforms to raise productivity is essential to future prosperity. the strategy which the mpc has pursued in recent years - stimulating domestic demand to compensate for weak external demand in the face of a strong exchange rate - carries the risk that there could be a sharp correction to the level of consumer spending at some point in the future. that risk is exacerbated by the continued strength of the housing market and associated borrowing that we have seen in recent weeks. it is possible that such weakness of domestic demand might be offset by an improvement in productivity, although as yet few signs of that are observable. three lessons from past monetary policy experience are relevant to the present position. first, monetary policy can target only the aggregate price level. and inflation expectations are now firmly anchored on the inflation target. but the risk of a correction to consumer spending derives from the possibility of sharp movements in relative prices, particularly of assets. expectations of the key relative prices within the economy, such as asset prices and the exchange rate, are volatile and difficult to measure, and changes in them are often desirable signals to producers and consumers alike. so it would be a mistake to target those relative prices. but understanding how they affect the expectations and spending decisions of the players in the economy is an essential part of monetary policy. second, it is easier to measure the money value of spending and output in the economy than to split it into estimates of “ real ” output, on the one hand, and price indices, on the other. that is why the latest data revisions have altered the picture of real growth over recent years, leaving estimated money spending and output broadly unchanged. in such circumstances it is sensible to focus on money spending. indeed, the success of the new monetary framework can be seen in the stability not just of retail price inflation but also of the growth rate of domestic demand in money terms. over the past few years the annualised growth rate of nominal domestic demand has remained in the range of 4½ % to 5½ %, a much greater degree of stability than experienced for many decades. third, it is extremely difficult to anticipate the future path of interest rates. that is because the monetary policy committee sets rates in response to news in the economy