what a difference a decade makes mark carney governor of the bank of england chair of the financial stability board remarks at the institute of international finance ’ s washington policy summit, the reagan centre, washington dc 20 april 2017 i am grateful to alice carr, wayne chapman, carsten jung and iain de weymarn for their assistance in preparing these remarks. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx introduction it ’ s a pleasure to be back at the iif ’ s washington policy summit. last time i spoke here ( in 2011 ) it was still early in the international financial reform process. from the iif ’ s perspective at the time, there were three major concerns : - the consistency of implementation across the g20 ; - the possibility of significant regulatory arbitrage in shadow banking ; and - whether the fsb / g20 ’ s ambitious agenda would impair the recovery. today, those debates have largely been settled. first, the new international minimum standards are being, by and large, consistently and promptly implemented in g20 jurisdictions. this progress is regularly assessed and transparently reported by the fsb and the imf. and in general, when countries have deviated from international standards, it ’ s because they have chosen to go further. second, activities which give rise to similar risks are being treated consistently regardless of where they originate. a series of measures have addressed the major regulatory arbitrage opportunities that encouraged shadow banking. contingent exposures of banks have been brought on balance sheet and appropriately capitalised. more generally, shadow banking is being replaced with market - based finance that adds diversification, competition and resilience to the system. as for the macroeconomic impacts, it has been apparent for some time that having well - capitalised, liquid banks is a pre - requisite — rather than an impediment — to growth. in those economies where reform has moved the quickest, the recoveries have been the most robust. indeed, the broader benefits of reforms are now being realised as the global financial system moves from fragility to resilience. credit is now growing in all major economies. the cost of financing has remained low. sources of finance are increasingly diversified between banks and markets. and the system is demonstrating an ability to dampen shocks rather than amplify them. the biggest question now is how to best take advantage of these years of hard work

arrangements – no longer represent a global stability risk. and other, more constructive, forms of shadow banking, including money market funds and repo markets, are now subject to policy measures that reduce their risks and reinforce their benefits. in tandem, global assets under management have grown rapidly from around $ 50 trillion a decade ago to $ 77 trillion in 2015, equivalent to 40 % of total financial system assets. this growth creates new sources of funding and investment, promotes international capital flows, reduces reliance on bank funding, and brings welcome diversity to the financial system. broker dealers were involved in market intermediation with short - term funding, opacity in securitisation gave rise to imperfect credit risk transfer, and money market funds were major purchasers of risky bank certificates of deposit and of asset backed commercial paper. these risks have been addressed through reforms to money market funds in the us, broker dealer regulation and securitisation reforms. see fsb policy recommendations to address structural vulnerabilities from asset management activities. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx at the same time, however, asset management ’ s importance reinforces the need to minimise the risk of sudden stops in times of stress. the fsb estimates that in 2015, more than $ 20 trillion of assets were held in funds susceptible to such risks. in january 2017, responding to the direction of g20 leaders in hangzhou, the fsb finalised its recommendations to address structural vulnerabilities and reduce liquidity mismatches associated with asset management. these recommendations are now being operationalised by iosco. the financial system is also simpler because more durable market infrastructure is untangling the previously complex – and dangerous – web of exposures in derivatives markets. a decade ago, otc derivative trades were largely unregulated, unreported and bilaterally cleared. uncertainty about such exposures contributed to the panic. in pittsburgh in 2009, the g20 announced a series of reforms designed to make these markets safer and more transparent, including by requiring trade reporting and by encouraging central clearing of otc trades. ccps reduce contagion risks in banking, and they make the massive derivatives markets more robust. the extent to which they reduce overall systemic risks, however, depends on their resilience and resolvability. to those ends, cpmi - iosco and the fsb will deliver further