That growth was driven in part by factors that can’t be repeated – the deregulation of the financial system in the 1980s, and the transition to low inflation in the 1990s. In the post-crisis environment, borrowers and investors are more cautious than they were, both at home and abroad.
That’s likely to mean less demand for leverage and less growth in private balance sheets, even when the economy itself is growing strongly. If those trends continue, I think it will be good for financial stability, but it will also mean that our lending institutions have to get used to lower rates of expansion than were typical in the pre-crisis years.