The industry needs to respond to these challenges by developing a greater diversity of business models, more diverse and stable income sources, and more rigorous risk management and stress testing techniques to assess its preparedness to deal with any downturn in economic activity.
As a central banker I am inevitably preoccupied by risk, especially when it could potentially impact on a significant sector of the financial industry. However, the challenges that I have highlighted are very much the result of the industry’s recent success.