year to over 3000 basis points. each of these steps has left casualties. many of the originators were forced into bankruptcy at the start of the year and in the last few weeks we have seen bear stearns ’ announcement that two of its funds have lost all or nearly all of their investors ’ money. i suspect the speed and scale of the changes were outside most stress test simulations. and while the most dramatic changes may have happened there will now be a long period as the implications work through the ratings of other derivatives and the full range of instruments are marked to market. a related lesson is about liquidity in new markets. the worry has been that at times of stress, liquidity would dry up and it would be impossible to trade out of positions. that would not just lock firms into losses but would disrupt strategies which require continuous dynamic hedging – for example, strategies such as constant proportion portfolio insurance ( cppi ). again that has been a feature of recent weeks. it has been widely reported that a couple of the lenders to the bsam funds put their collateral on the market but were not able to sell as much as they wanted. that is connected to the fourth lesson, the vulnerability of valuations in sophisticated derivatives. these are not widely traded so valuations are usually based not on market prices but on models which draw in turn on correlations established over the recent past. this is a fundamental and unavoidable feature of new products and markets. there simply has not been a full cycle ’ s experience to draw on. when we published our financial stability report in april we drew attention to the sub prime history as a warning of what could go wrong in bigger and more central credit markets. developments since then underline that message. if some of the price moves in the sub prime cdos have spread to clos based on leveraged loans and buy - outs, that is hardly a surprise given recent growth in that market ( chart 8 ). there are signs that the speed with which the pipeline of leveraged deals is being warehoused has slowed down at least temporarily and the terms of some of the lending has tightened a little. but that said there are some significant differences between the sub prime and corporate loan markets. first corporate profits remain robust and there has not been the step up in defaults that ushered in the sub prime crisis. second while the total size of the corporate bond market dwarfs the sub prime mortgages market that is not true of the leveraged corporate loan market

to many of the positive developments we have seen - through their own example in promoting community involvement, including their support for the heart of the city campaign ; through their own role in maintaining security and co - ordinating the " public " infrastructure - both vital to all our contingency plans ; and through their support for the fundamentally international character of the city, not least in opening the way to the guild. i am profoundly grateful to them for all the help and support they give to us all. it is in that context that i ask you now to rise and join me in a toast to " the rt hon the lord mayor, the corporation of the city of london and the sheriffs. "