In sum, financiers were taking on more risks than they would like to, and in many respects they did not understand or were unaware that they were doing so. This reasoning suggests that policy actions to treat underlying causes should address the causes of risk mispricing and should attempt to reduce uncertainty.
The adjustments underway in our oil sector will eventually be completed. And firms tell us that they need to make new investments, and the recent rules around capital cost allowances are likely to speed that up. The Bank’s role in this process is to maintain a predictable environment for decision making.