for example dealing with the matter of repo transactions, and examining the structure of supervision of the financial markets. the committee formed by the securities authority also put forward recommendations regarding securitization, and it important that these be advanced too. and there are many other subjects. among the required changes, however, it is also important to draw attention to the arrangement of the necessary legal infrastructure. at present we are in the throes of a very long legislative process that is not yet over in relation to a law to deal with repotype financial transactions and the issue of netting. but there are several other laws that it will be necessary to advance, for instance a law that will relate to mortgage and loan securitization in general, and a law relating to the reform of the payment and settlement systems that the bank of israel is leading ( the rtgs system ). the government should certainly give maximum impetus to the promotion of the legislation in these areas. such legislation is one of the most important means for removing barriers to the development of the capital market as it sets the ground rules for the market, rules of transparency, and grants supervisory and enforcement authority to the relevant bodies. with regard to the development of and competition in the financial markets, i would like to say a few words about competition in banking. the reform of the capital market introduces greater competition into the financial systems, especially in the credit market, but competition between the banks on the retail side leaves much to be desired. this is mainly due to the fact that the largest two banks are very dominant in the banking system. their share in the system should be reduced, either by the merger of other banks or by the entry of foreign banks into retail banking in israel. such steps are the outcome of decisions by the banks themselves, but we on our side will continue to examine steps to remove barriers where they exist in this area and in the area of increased interbank competition. boosting competition in the banking system is one of the most important objectives of the bank of israel and, i assume, of the government. c. social policy as far as social policy is concerned, i do not wish to refer here to the short - term measures required. i have referred to them at length on various other occasions, and today dr karnit flug, director of the bank of israel's research department has spoken about them. i would only say that the steps decided upon in the discussion with the prime minister last december are important and the

index and bank calculations whilst the august volatility didn ’ t lead to wider market dysfunction, had subsequent macroeconomic news been less supportive, further deleveraging could have occurred as marketbased finance vulnerabilities remained elevated. from my perspective, the episode highlighted, yet again, [ 4 ] that correlated, leveraged positions, when unwound, can act to amplify an initial shock. notably, it was another example of how vulnerabilities in market - based finance can crystallise. we have previously set out [ 5 ] – and summarised in figure 2 – how vulnerabilities in market - based finance affect financial stability, where firm - level vulnerabilities like leverage ( first orange column ) interact with system - wide vulnerabilities like concentration and correlation ( second orange column ) to amplify shocks. figure 2 : how market - based finance vulnerabilities can affect financial stability vulnerabilities and transmission channels to financial stability source : bank of england to me it provided another piece of evidence suggesting that we ’ re seeing structural changes consistent with a new tendency to volatility in financial markets and the wider system. nikhil rathi, fca chief executive, has described this development as ‘ predictable volatility ’, [ 6 ] whereby developments in technology alongside greater market concentration and inter - connectedness mean we are more likely to see large swings in prices, particularly intraday, as markets can react faster to information and are more prone to herding behaviour. is that new volatility a sign of increasing financial instability? no, it is not. market volatility does not equate to financial instability, but we have to monitor and act on those developments appropriately, at the firm level, system - wide level and, importantly, in the operation of the bank ’ s balance sheet. so today, i want to reflect on what we ’ ve seen in 2024, with its lack of significant dysfunction but continued volatility. i will first consider what developments are taking place in the uk financial system, with the focus this year firmly on the non - bank sector. i will go onto set out how risks at the firm level could transmit to the system - wide level and comment on what the bank is doing to monitor those risks – as andrew bailey emphasised in october, [ 7 ] we must keep our focus on the system - wide perspective in assessing financial stability risks. i will then set out