iii. however, a complementary way to deal with the problem is to influence the underlying incentives for short - term debt issuance. and these incentives are in turn shaped by the structure of rates and term premiums in the market. as i noted earlier, a natural response for any firm facing an unusually low term premium is to adjust its capital structure by issuing cheap long - term debt to replace its shorter - term debt. it is therefore not surprising that the average debt maturity of large nonfinancial firms has increased notably over the past few years. moreover, the same pattern shows up among large financial firms – they too have been significantly lengthening their average debt maturity. the current cheapness of long - term debt contrasts with the pre - crisis configuration, where frequently a pronounced premium favored issuers not at the long end of the yield curve, but at the very short end. in other words, the fact that the yield curve often tended to be steeply upward sloping at the front end gave financial firms a strong incentive to issue overnight paper. thus i suspect that lsaps have, by changing the structure of term premiums in the market, helped encourage an extension of debt maturity by both financial and nonfinancial firms. all else being equal, this development is a good thing from a financial stability perspective. to conclude : a corporate finance perspective on lsaps suggests that when monetary policy works by moving term premiums, as opposed to moving expectations about the future path of short rates, the transmission to the real economy may be altered in important ways. these differences can have implications for how we think about the benefits of a policy action, its costs, and even its consequences for financial stability. thanks very much, and i look forward to your questions. bis central bankers ’ speeches

both the wholesale and retail spheres. in the wholesale sphere, the recent focus has been on tiering. historically, chaps had a very tiered structure, with the majority of payments being made by settlement banks on behalf of their customers, a practice which generated significant intraday credit and liquidity exposures between direct participants and their customers. this model also concentrated operational risks, given that an outage at one of the big settlement banks would have prevented its customers from making payments. these risks would be exacerbated in periods of stress, potentially contributing to contagion as payment services were withdrawn or collateral suddenly demanded. since the crisis, the bank, working with the scheme manager chaps co, has acted to reduce tiering. five banks have become direct participants of chaps since 2007, and a further five have given us formal indication that they will do so soon. as a consequence, the proportion of chaps payments made by direct members on their own account is set to increase from around 40 % in 2007 to approaching 70 %, substantively addressing the tiering risks that had previously existed in the wholesale sterling markets. in relation to the retail systems, we have also sought to address latent contagion risks by reforming the arrangements covering member default in two of our largest retail payment schemes ( bacs and faster payments ). as currently structured, these default arrangements contain a heavy “ survivors pay ” element, where the other members of the payment scheme assume a portion of a failing member ’ s payment obligations ( either temporarily, a liquidity risk, or permanently, a credit risk ). this creates a clear contagion risk. recently, the schemes have agreed to move to a full “ defaulter pays ” model, where all obligations are fully collateralised in advance, in cash, segregated in each bank ’ s account with us. the move from survivors to defaulter pays will take place in the next year or so. separately, but driven by the same philosophy, we have sought to reduce the operational risks that we ourselves run as the core infrastructure provider within the sterling system. the bank of england currently runs the uk ’ s rtgs infrastructure from twin operational sites so we can continue to provide rtgs settlement in the event of a problem at either. while this is a highly resilient arrangement, it would be vulnerable to a catastrophic failure which took out both sites simultaneously. to counter this risk swift, the telecommunications firm, is developing a product – known as the market infrastructure res