gdp peaked sources : ons and bank calculations. notes : the chart plots real business investment. the range includes the recessions of 1973, 1979 and 1990. all speeches are available online at www. bankofengland. co. uk / speeches chart 3 : uk real business investment to gdp ratio is falling percent of gdp source : ons. chart 4 : investment consistently weaker post - crises average financial recession cumulative change ( per cent ) average normal recession - 5 0 - 10 years - 15 - 20 - 25 - 30 source : jorda, o., schularick, m. and taylor, a. ( 2013 ), ‘ when credit bites back ’, journal of money, credit and banking, vol. 45, issue s2. notes : the chart shows the cumulative change in per capita investment. the grey shaded area shows a 95 % confidence interval around the average normal recession. all speeches are available online at www. bankofengland. co. uk / speeches chart 5 : uk, us and euro - area capital overhangs being worked off uk capital to output ratio euro area capital to output ratio euro area trend capital to output ratio us capital to output ratio us trend capital to output ratio per cent per cent uk trend capital to output ratio 1995 1999 2003 2007 2011 2015 1995 1999 2003 2007 2011 2015 sources : bea, oecd, ons and bank calculations. chart 6 : zombie firms rising in aes, falling in the uk ( a ) per cent of firms 12 % per cent of firms 30 % 10 % 25 % 8 % 20 % uk measure ( rhs ) ( c ) 6 % 15 % global measure ( lhs ) ( b ) 4 % 10 % 2 % 5 % 0 % 0 % source : european commission, ameco database ; imf, world economic outlook ; datastream worldscope ; the conference board ; bis calculations ; bureau van dijk and bank calculations. ( a ) zombie firms are defined as firms with a ratio of earnings before interest and taxes to interest expenses below one. ( b ) sample includes listed firms aged 10 years or more. shown is the median share across au, be, ca, ch, de, dk, es, fr, gb, it, jp, nl, se and us. ( c ) sample includes both publicly listed and private uk firms. only firms whose turnover reached £1 million in one of the past ten years are included. there are around 17, 200 firms per year

with the uk ’ s icas regime. solvency ii recognises many of the principles that form the basis of that regime, and therefore introduces a level playing field with the rest of the eu. risk - based capital standards and robust valuation practices ensure resilience against unexpected losses. the enhanced disclosure rules in turn aim to encourage the effective exercise of market discipline through increased provision of information. our approach to third country branches will aim to ensure that they are operating to standards that give branch policyholders an equivalent level of protection to policyholders of an eea - headquartered undertaking. the three pillars of solvency ii not only provide a robust foundation to support the safety, soundness and resilience of individual insurers, but also in turn support stability in the system. the financial services sector is more interconnected than ever before. risks to the financial system can affect all firms ; we therefore need to ensure that our analysis is rigorous not just within sectors but at a cross - sectoral level. with a number of mixed financial groups undertaking insurance, banking, asset management and any number of other activities in bis central bankers ’ speeches multiple locations across continents, it is vital for firms and regulators alike to understand the interconnections and dependencies not only between different firms but within them as well. this is just one reason why it is so crucial to get the new regime right. the introduction of consolidated group supervision under solvency ii will ensure supervisors and firms have greater clarity in their overall view of group business, and are able to recognise and therefore manage risks that would not otherwise be visible. in particular, we will be able to look across groups to ensure that they have adequate resources, even if risks are being transferred to group companies located in countries with different regulatory regimes, such as offshore centres. and we will be alert to regulatory arbitrage, such as where risk transfer through reinsurance is negated through sliding scale commissions. the financial crisis, and the post - crisis regulatory reform agenda, have taught us many lessons. the business models of insurers and banks are different, but those lessons have informed and will continue to inform how we manage the implementation of solvency ii. perhaps most salient for this conference, is the difficult lessons we have learned from experience with insurers and banks when it comes to the use of internal models. many of you in this room will be acutely aware of the demands of the solvency ii model approval process. this rigour has a purpose