of global standards combined with the common basis of the rules – since the uk transposed eu rules from the outset – would be enough to base equivalence on global standards. less than this was enough when canada, the us, australia, hong kong and brazil were all deemed equivalent. continuing with the example of central clearing, the eu has recently made the us sec equivalent for ccps, subject to certain conditions. these conditions are already met by uk ccps as they are a legal requirement in the onshored legislation, but equivalence beyond the temporary extension remains uncertain. the eu has argued it must better understand how the uk intends to amend or alter the rules going forwards. this is a standard that the eu holds no other country to and would, i suspect, not agree to be held to itself. it is hard to see beyond one of two ways of interpreting this statement, 2 / 4 bis central bankers'speeches neither of which stands up to much scrutiny. the first interpretation is that the rules should not change in the future, and to do so would be unwelcome. this is unrealistic, dangerous and inconsistent with practice. as the world around us changes, so must the rules to accommodate these changes. as evidence of this, look at what the authorities have had to do in response to covid and the shock that created for financial markets. the eu is almost constantly revising, or contemplating revising its own rules, and that ’ s a good thing. so, i dismiss this argument. the second argument is that uk rules should not change independently of those in the eu. i am being careful to phrase this point. it ’ s not that uk rules might change independently – the equivalence process provides for re - assessment of such decisions, so this should not be a problem. so, it must be the stronger form that they should not change independently. but that is rule - taking pure and simple. it is not acceptable when uk rules govern a system 10 times the size of the uk gdp and is not the test up to now to assess equivalence. it ’ s worth considering why we would choose to change the rules. first, it would be rare to say the least if such rules turn out always to work perfectly first time and thus need no amendment. as an example of this, the eu itself is looking to amend mifid2 to iron out areas that need further work. second, as the world moves on, so the rules need to adapt. if they do

banks to lend to such clients on a collateralised basis to finance their holdings of securities ( “ margin lending ” ). this is an area where regimes vary enormously around the world or are non - existent. for example, the us domestic regime is stricter on this than europe. we need a global discussion. securities lending, repo and collateralised - financing markets so far i have discussed funds or vehicles or firms that are in economic substance shadow banks. we also need to think about the markets that firms and vehicles can use to develop a de facto banking business. perhaps the key such markets are securities lending and repo – or, more generally, collateralised borrowing. before proceeding i must stress that these markets are vital to efficient capital markets. the crucial economic function of market - making entails intermediaries going short, and so needing to cover their position by borrowing securities. and repo has enriched the money markets. but it is also true that anyone holding a securities portfolio can build themselves a shadow bank using the securities lending and repo markets. one simply lends out the securities at call for cash, and then one employs that cash by making loans or buying credit - assets with a longer maturity. this is leverage and maturity mismatch. that example assumes the shadow - banking business is built by the investor who holds the securities outright. but, of course, nothing is so simple. the first lender of securities might lend against securities collateral and do no more ; that is relatively common in european markets. but the entity that has borrowed those securities could themselves repo out the borrowed securities for cash, and employ the cash in a lending or credit - asset business. and bis central bankers ’ speeches so on – ie at any point in the chain of securities lending, an intermediary can build themselves a shadow banking business. such chains can prove fragile for all sorts of reasons – because many securities are at call, and because many secured lenders try to realise their collateral instantly upon default. it is also worth mentioning that some asset managers have no – zero – appetite to hold the underlying paper outright in the event of their counterparty defaulting, either because the assets are not covered by investment mandates or the fund managers do not know how to manage them, etc. what i suggest on this front is : there should be greater market transparency, perhaps ideally via a trade repository with open access to aggregate data, so that the world can see what is happening in these very important but opaque