, might we look back on this recent period of turbulence as just a bout of market nervousness that that carries little lasting importance? these are the questions policymakers have to grapple with and as yet we do not know the answers. resilience but if there were a material change to the global outlook happening – and, let me be clear, i am not saying there is, but if there were – how resilient are we? and how can we be more resilient? there are a couple of things to say at a global level. the first is that the global banking system is better capitalised and more liquid, and hence more resilient, today than it was eight years ago. this part of the financial sector is a good deal less likely to be an amplifier of other shocks than it was then. of course this strengthening needs to continue ; there is a way to go yet for full implementation of the various reforms. but progress is being made. it is noteworthy that much of the increase in financing in recent years has flowed through capital markets. it has to be acknowledged that bond markets are less liquid than they used to be. this is partly because the major international banks now do not commit the same size of balance sheet to market - making activities – and that stems, in part, from regulation. this, no doubt, is part of the story as to why markets have been more volatile recently, though it is probably not the whole story. large investors are coping with this by accepting that it takes longer to move a parcel of securities. but some worry that liquidity may be much more significantly reduced in moments of stress, meaning that it may require much bigger price changes for markets to clear. as it is, some of the world's deepest and most important markets have, on a few occasions over the past year, seen very large price movements – thankfully for only fairly short periods. more generally, the search for yield has seen investors, including sovereign funds, insurers, and mutual funds held by retail investors, move into assets that are inherently less liquid. this leaves us, unavoidably, with a degree of uncertainty about how markets might cope with larger shocks, and how larger price changes for assets priced in those markets may feed back to the economy. not surprisingly, liquidity management for asset managers and the question of liquidity conditions in markets in general are key themes for the financial stability board at present. but for all that, it seems to

of oil. the evidence thus far is that demand has slowed a little, but supply has increased rapidly in recent years and is expected to remain at a high level this year. this matters because, usually, more supply of something and a cheaper price is good news, not bad. to be sure, lower oil prices require adjustment on the part of producers – corporate and sovereign. but this has always been so and an increase in the availability of energy and cheaper prices has generally, in the past, been seen as a plus for overall global growth – a positive ‘ shock ’. this was because the response of consumers of oil to a decline in its price was to consume more – not just more oil but other goods and services as well, using the higher real income afforded by lower oil prices. it was thought that this outweighed the negative effects of spending cutbacks in oil - producing countries. it seems people are less confident this time of a fall in oil prices being expansionary. why so? the fact that the united states has become a larger oil producer ( and a significant producer of the short - run ‘ marginal barrel ’ ) is clearly relevant. so is the possibility that consumers both there and in europe may, for particular reasons, be more inclined to save any windfall from lower oil prices than they used to be. these factors may, for a time, work against the traditional positive effect. in addition, the price for oil was high enough, for long enough, that many investment and spending decisions were taken around the world that look, perhaps, not quite so sound in hindsight. hence, producer countries have budget strains ; some sovereign wealth funds are liquidating financial assets ; spreads on debt instruments issued by energy companies have widened sharply ; exploration and new investment is being curtailed rapidly. it seems as though the sheer strength and longevity of the preceding period of very high oil prices prompted behaviour that made some players more vulnerable to a price decline. that, of course, is not unknown in the history of commodity markets. having said all that, people might be being a little too pessimistic about the effects of the fall in oil prices. it is still equivalent to a reduction in taxes for a very large number of consumers around the world who now have more disposable income to spend or to repay debt. the shareholders and state owners of the producing assets, who gained from the higher prices, are wearing most of the costs of the lower price, along with those who provided