forward to working with our fellow regulatory agencies and with congress to achieve these important goals. and finally, i would also like to note that work continues to address the risks identified with existing reference rates. just last week, the alternative reference rates committee ( arrc ) selected a new rate suitable for use with new derivative contracts. i am confident the broad treasuries repo rate, which the federal reserve bank of new york has proposed publishing in cooperation with the office of financial research, is based on a deep and actively traded market and will be highly robust. with this choice, the arrc has taken another step in addressing the risks involved with the libor. 1 these remarks are substantially similar to the testimony delivered at the senate committee on banking, housing, & urban affairs hearing titled “ fostering economic growth : regulator perspective ” on june 22, 2017. 2 / 2 bis central bankers'speeches

accompanied by rising uncertainty. the combination of rising uncertainty and credit constraints would tend to lead to further reductions in spending as households build precautionary buffers. this is likely to be particularly true when there is increased uncertainty about unemployment. 15 the literature suggests that both channels can be important. for example, danish research finds evidence in favour of over - consumption in denmark over 2003 to 2009. 16 this captures consumption financed by mortgage equity withdrawal or second mortgages, although the results may in part be driven by consumer credit, as the study does not distinguish between mortgage debt and consumer credit. the authors of the study think of the subsequent cuts in consumption as ‘ spending normalisation ’. in the uk, however, research shows that a credit availability channel is best able to explain the historical movement between leverage and consumption. 17 and studies in the us point to a range of channels, including credit availability and liquid assets. 18 this variation in findings is not surprising. one would expect the channels to vary over time and across countries. but what does it mean for policy? for example andersen et al ( 2016 ), kovacs et al ( 2018 ), dynan and edelberg ( 2013 ) and fagereng and halvorsen ( 2016 ). for example bridges et al ( 2017 ) and jorda et al ( 2016 ). for example, in japan, nakajima ( 2018 ) finds that precautionary saving – in particular due to concerns about potential unemployment and old age – played a significant role in explaining consumption cuts by highly indebted households. andersen et al ( 2016 ). kovacs et al ( 2018 ). dynan and edelberger ( 2013 ) and baker ( 2018 ). all speeches are available online at www. bankofengland. co. uk / news / speeches in 2014, the fpc introduced the borrower - based tools to guard against an increase in the extent to which highly indebted households could amplify macroeconomic downturns. these tools could achieve this goal in a number of ways. by constraining the increase in the aggregate number of highly indebted households, the tools reduce the proportion of households that could have insufficient liquid assets or lose access to credit in the event of a shock. and by providing some check, in aggregate, on excessive credit growth relative to income, these tools could also provide benefits in the event of debt - financed overconsumption, if it were driven by