erkki liikanen : low interest rate environment and systemic risks – current issues speech by mr erkki liikanen, governor of the bank of finland, at the risklab / bof / esrb conference on systemic risk analytics, helsinki, 6 october 2016. * * * accompanying slides can be found on the bank of finland ’ s website : slides ( pdf ). [ slide 1 ] [ slide 2 ] 1. introduction [ slide 3 ] since the financial crisis there have been significant efforts in fiscal, monetary and structural policies to resurrect demand across the globe. monetary policy has had an important role. high debt levels in many countries are constraining fiscal policies. but even in those countries composition of expenditure could be more growth friendly. there has been progress in the structural reforms, but there is still room to go beyond of what we have witnessed so far. on the side of the financial market regulation the regulators around the world have worked to make the banks and the financial system safer. banks ’ capital levels have been increased to improve resilience and more liquid assets are required to cover banks´ liquidity needs in stress. banks will also be required to fund their operations from stable sources that reduce the reliance on the short - term wholesale market funding. plans are laid out to guarantee an orderly resolution of the largest and systemically most important banks. as banks adjust to these requirements they will have to re - evaluate their business models. while banks have become safer, the new requirements may have pushed parts of their traditional business outside the banking sector to the so called shadow banking sector, which has been growing recently. in this talk i will discuss the underpinnings of the low rates environment and its implications for financial stability. i will also touch upon the developments outside the banking sector that we need to follow in order to make sure we make use of the lessons we have learned from the crisis. 2. the low interest rates environment [ slide 4 ] following the financial crises, the return to economic growth has been slow in many regions. this is explained in part by some of the long - term forces that existed already before the crisis, and partly by the effects that resulted from the crises. [ slide 5 ] the potential long - term causes are related to ageing populations, and changes in the pace of technological development, which drive productivity gains. [ slide 6 ] 1 / 5 bis central bankers'speeches while the demographic trends are evident, a persistent decline in productivity growth is only

have arisen, and to cooperate with the legal authorities. we have also sought to respond honestly to questions from this committee. i have previously given evidence to the committee on the sequence of events as we saw them unfold. it is worthwhile to try to draw that together. in so doing, it is important to keep clear the distinction between the two companies in that sequence. in 2006, following the events at the australian wheat board, the reserve bank board asked questions about the policies for the use of overseas agents by the two companies. in the case of npa, the bank ’ s questions prompted the company to begin a process of developing stronger policies. rba management asked for an update on progress at npa in early 2007, and the npa board appropriately sought a paper from management on dealings with sales agents. after considering that paper, the npa board decided that an audit should be undertaken of past practices and compliance. that audit raised several very concerning things. it recommended that, apart from discontinuing the use of agents, the npa board undertake an urgent investigation of the role of relevant management and staff in dealing with agents to ensure compliance with australian law. on receiving this report, the npa board took the decision to cease the use of agents, and through a board sub - committee commissioned freehills to provide an assessment of the standards and compliance questions. it was while all these processes were under way that concerns held by a member of npa ’ s management over the company ’ s conduct became known to a reserve bank assistant governor who sat on npa ’ s board. the npa manager was asked by the then deputy governor to make a written statement. this document was part of the material examined by the freehills team that was asked by the npa board to examine the matters. i have conveyed these facts to the committee over the course of questioning at previous hearings. the document provided by the manager at npa was held in strict confidence at his request. this was a condition required by him, and the bank agreed to it because it valued his willingness to come forward. seeking professional legal expertise to assess the matters contained in this document, and the concerns raised in the audit, was a mark of how seriously they were taken. the decision to seek an external legal review was an important one. in the bank ’ s view, it was imperative to establish a process to investigate the issues thrown up by the audit findings and to ascertain and evaluate the