. in most jurisdictions it is far better equipped with tools to identify and mitigate risks arising in the banking and insurance sectors than in market based finance. this gap needs in my view to be addressed. and macro - prudential policy cannot solve all problems. it may fall to other authorities and policy instruments to respond to any adverse structural effect from changing business models on the provision of financial services to some sectors of the economy, for example credit to smes. while it can create space for demand management by monetary policy authorities and prevent the financial system from amplifying macro - economic shocks in a low for long world, it is not in itself a demand management tool. whether and how monetary, and perhaps fiscal, frameworks should adapt to a world of structurally low interest rates is a related but separate issue which is receiving considerable attention from academic research and, more recently, policy makers in some jurisdictions. 29 see, for example clarida ( 2019 ) and wilkins ( 2018 ). all speeches are available online at www. bankofengland. co. uk / news / speeches discussion is at a relatively early stage and these are, in my view, issues that would need a great deal of careful deliberation. it is not my purpose today to enter that debate. i would only make two observations from a financial stability perspective. the first is that while i am a firm believer in the ‘ separation of powers ’, to quote my colleague ben broadbent30, between in the conduct of monetary and macro - prudential policy, the financial stability dimension needs to play a part in any discussion of demand management. my intuition is that, from a financial stability perspective, not all demand management frameworks are equal. and if there is a role for fiscal policy, then that also affects the financial stability calculus31. the second, and related point, is that the financial stability dimension needs to be taken in the round. the impact of monetary policy on financial assets and leverage, for example, is a very important consideration. but we should not, on the other hand, lose sight of the fact that a world in which downturns may be more severe and more persistent because demand management is less effective would also be a significant and perhaps a greater challenge for financial stability. conclusion jane austen ’ s navy fives, as i noted at the start, gave her nominal annual return of nearly 6 %. but her real return, when she purchased them in 1815, was closer to 20 %

. britain was entering a severe recession that year at the end of the napoleonic wars with deflation of more than 10 %. the annual return in 1817, the year of jane ’ s death, was actually negative 2 % as inflation rebounded. a few years later britain reverted to its pre - war monetary standard by restoring sterling ’ s convertibility to gold. over the following 50 years, nominal interest rates came down a little but stayed in the 3 - 5 % range. broadbent ( 2018 ). from a narrow financial stability perspective, growth of own currency sovereign debt, especially when financed internally, is not a good predictor of financial crises. see cunliffe ( 2019 ). all speeches are available online at www. bankofengland. co. uk / news / speeches but real returns on the navy fives and similar fixed rate securities continued to be highly volatile reflecting the very large swings in inflation for much of period – a period that was punctuated by frequent financial crises. that perhaps illustrates that there is a great deal more to stability - both financial and monetary - than nominal interest rates. all speeches are available online at www. bankofengland. co. uk / news / speeches references anadu, k., m. kruttli, p. mccabe, e. osambela and c. h. shin ( 2018 ), the shift from active to passive investing : potential risks to financial stability?, working paper pra 18 - 04, federal reserve bank of boston. andersen, a., c. duus, and t. jensen ( 2016 ), household debt and spending during the financial crisis : evidence from danish micro data, european economic review, 89, pp. 96 - 115. avery jones, j. ( 2019 ), jane austen ’ s income : insights from the bank of england archives, bank underground blog, 2 august 2019 bank of england ( 2019 ), financial stability report, issue no. 45, july 2019. bank of england ( 2018 ), inflation report, august 2018. bank of england ( 2017a ), stress testing the uk banking system : key elements of the 2017 stress test, march 2017. bank of england ( 2017b ), financial stability report, issue no 42, november 2017. borio, c. ( 2017 ), secular stagnation or financial cycle drag?, keynote speech, national association for business economics, 33rd economic policy conference. brainard, l. ( 2017