meeting that morning with the chancellor, gordon brown, who had explained the proposal for bank independence. it was something for which eddie and i had worked for five years since britain ’ s departure from the exchange rate mechanism in 1992. now we had a chance to show what an independent central bank could do. although far from clear at the time, the later decision to remove from the bank of england the power to regulate banks would return to haunt us. over the next decade, the new monetary policy committee established a track record of low and remarkably stable inflation. in my first speech as governor in 2003, i warned that this stability was unlikely to continue. and it didn ’ t. within a few years, and despite low inflation, the advanced economies of the world were plunged into a financial crisis which led to the sharpest decline in world trade since the 1930s, recessions across the world, rising unemployment and the near collapse of our banking system. bis central bankers ’ speeches so tonight i want to try to answer three questions. first, what went wrong? second, what are the lessons? third, what needs to change? let me start by pointing out what did not go wrong. in the five years before the onset of the crisis, across the industrialised world growth was steady and both unemployment and inflation were low and stable. whether in this country, the united states or europe, there was no unsustainable boom like that seen in the 1980s ; this was a bust without a boom. so what was the problem? in a nutshell, our banking and financial system overextended itself. that left it fragile and vulnerable to a sudden loss of confidence. the most obvious symptom was that banks were lending too much. strikingly, most of that increase in lending wasn ’ t to families or businesses, but to other parts of the financial system. to finance this, banks were borrowing large amounts themselves. and this was their achilles ’ heel. by the end of 2006, some banks had borrowed as much as £50 for every pound provided by their own shareholders. so even a small piece of bad news about the value of its assets would wipe out much of a bank ’ s capital, and leave depositors scurrying for the door. what made the situation worse was that the fortunes of banks had become closely tied together through transactions in complex and obscure financial instruments. so it was difficult to know which banks were safe and which weren ’ t. the result was an increasingly

##ifiers, and a role for authorities in helping develop those standards, is far from new. let me give a recent example. one major lesson from the great financial crisis was the need to be far better at identifying the many entities and organisations operating within the financial system. when the crisis hit, the lack of any uniform international method of identifying the huge number of legal entities scattered across the world added to the crippling uncertainty over who owed what to whom. we all remember that uncertainty causing panic on the financial markets. so was born the legal entity identifier, or lei – a 20 - character alphanumeric code that uniquely identifies a legally distinct entity. it allows data relating to a single bank, insurer or whoever, to be combined. over one and a half million entities in over 200 countries have now registered for an lei. and it has had a wide range of benefits. it has supported the portability of data between organisations. it has aided the fight against money laundering. and it has been helpful in our data collections : for example, when we ask firms to submit counterparty exposure data to us, it provides a clear way for us to compile data about each entity. so the lei is a growing success. but it also demonstrates that the adoption of standards is a long journey, with a continued need for public sector involvement. the g20 endorsed the lei system as a global standard back in 2012. it has come a long way since then, but it still has further to go, and we will continue to support it. its adoption so far has in part been due to the push from regulators, but it needs to be used by a wider set of participants – we at the bank are continuing to support that wider uptake, including for corporates beyond the financial sector. it needs to be included in new areas such as payment messages – we will soon be mandating the use of leis in payments through our chaps system. more broadly, lei systems and processes need to continually evolve to ensure they can meet the demands of a digital world. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice the lei shows that standards take time to be designed, refined and adopted, and so reaping their benefits requires patience and persistence. that will be the case for our collective journey, too. our approach to developing standards so how do we plan to go about expanding and improving the use