although concerns about the processes associated with the us fiscal deficit have now resurfaced ). while fiscal consolidation might have slowed us growth somewhat, the process of adjustment around the turn of the year had been smoother than feared and the macroeconomic repercussions rather less. china had injected some renewed stimulus and japan had introduced a far reaching new economic framework of quantitative and qualitative easing to improve the outlook there. at that time, middle east tensions had not induced further western military intervention and the oil price had been relatively stable, falling to around the $ 100pb mark. one could argue that central banks – and other authorities – had validated expectations. during this period from the autumn of 2012 to the spring of 2013, financial markets were relatively calm but periods of “ risk on ” were lasting for longer and leading to greater risk taking. equities and other risky asset prices generally rose. interest rates were low and stable at the short end and increasingly depressed at longer maturities as the fomc maintained its asset purchase programme. the hunt for yield intensified, especially down the credit spectrum, with some investors being driven by return targets, mandates and benchmarks rather than a true reflection of risk - adjusted returns. the volatility of market prices also became compressed during this period ( chart 1 ). bis central bankers ’ speeches chart 1 implied volatility from various asset markets 27 feb 2009 standard deviations from mean since 2006 usdgbp 01 may 2013 16 jul 2013 japan long rates japan short rates jpyusd usdeur - 1 - 2 us long rates ftse 100 us short rates s & p 500 uk long rates nikkei 225 uk short rates chart 2 shows a “ heat map ” constructed by colleagues in the bank ’ s financial stability directorate, showing how market functioning has changed over time based on issuance levels and spreads. it tracks how most markets have continued to improve towards normal levels ( on these indicators at least ). an interesting exception is markets for bank funding instruments in europe, which have become subdued as commercial banks have de - levered and central bank operations have provided cheap medium - term funding in large scale. perhaps the worst functioning is the market for cmbs which has still not really returned in the uk ( in contrast to clos which have made a comeback this year ). chart 2 market functioning “ heat map ” based on issuance and spreads data ( a ) ( b ) p r i m a r y corporat e bonds bank bonds,

responsible openness : the pra ’ s approach to supervising banks speech given by david bailey, executive director for international banks supervision, prudential regulation authority bank of england hosted webinar 11 january 2021 i am grateful to andy murfin, tom crossland, orfhlaith sheehy, caleb barnes, shakir anverally, marina barnard, ross howie and tanveer hussain for their assistance in writing this speech. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice introduction welcome. i am delighted that so many of you could join us today. i started my role as executive director for international banks supervision in late 2019. i took on the role, in part, because of the wide variety of firms i would be supervising, the diversity of cultures i would be interacting with, and the promise of travel to exotic locations. the role has delivered in many respects – although given the events of the last year, the travel has been somewhat disappointing. while my travel guides are left unread, my videoconferencing systems guide has many worn pages. one clear lesson i have taken away from talking to such a variety of institutions remotely, is the value of simple and clear communications. so today i will be giving you the headlines from our supervisory statement published today that sets out the pra ’ s approach to supervising international banks. it sets out publicly, for the first time, our approach to subsidiaries and combines that with the approach set out in our existing supervisory statement on branches ( ss1 / 18 ) 1. let me emphasise that the key message i want to give you today is one of stability and consistency in our overall approach. we have all faced a lot of change and uncertainty, especially over the last year – but i want to assure you that our supervisory approach remains both stable over time and consistent across the firms we supervise. it remains both robust and proportionate. why now? we are publishing this now, for three main reasons : 1. first, to set out our approach to host supervision in a holistic way. we published our approach to branches in 2018 but this publication goes further and covers the full range of authorisation options available to international banks. by making clear our expectations we will provide transparency for all parties. existing firms, new and transitioning firms, and home regulators. 2. second, there remains strong interest from international banks seeking a banking licence