The incident may also raise some questions about how effectively market forces are acting to restrain those taking outsized risk positions, something that I will return to in a moment. Taken together, these developments provide a strong baseline for financial stability. But the risks that we pointed to in July are still there. In particular, we pointed to the risk that financial firms concerned about losing market share in rapidly expanding markets might pay less attention than they should to their resilience to unexpected shocks. [Chart 1] gives our assessment of developments since July. It shows that a number of the vulnerabilities have edged up a little as leveraged buy-out (LBO) activity and commercial property lending have grown and as the number of personal insolvencies has increased. On the other hand, the slowdown in the US economy and the beginning of a narrowing in its trade balance may have reduced the risks on that side, although we didn’t judge this material enough to change our overall assessment. BIS Review 124/2006  1  We know how easy and how fruitless it can be to draw up long lists of things that could go wrong without paying attention to their likelihood. So we try to take a balanced view that recognises not just what could go wrong but also recognises changes that we think have a positive impact on financial stability.
For example, traders on the CCI-ILSTC have to rely on the multi-modal transport bill of lading or MTBL as proof of title as the goods are being carried on land, by rail, and over sea. However, the MTBL is currently not widely used as a negotiable document, unlike ordinary bills of lading which have clear legal status. This limits the access to trade financing facilities for importers and exporters using multimodal trade routes. We must step up efforts to enhance the acceptance of MTBLs amongst trade players in China and ASEAN. In fact, the MTBL will need to be recognised as a negotiable document, not only in its paper form but also its electronic form. Government agencies from Singapore are working with the Chongqing Port and Logistics Office to conduct a pilot to digitalise bills of lading, including the MTBL, using TradeTrust. TradeTrust is an interoperable framework to support the exchange of electronic documents. It uses distributed ledger technology to allow trade actors to establish the authenticity of a digital document. If we can scale the use of TradeTrust within the CCI-ILSTC, banks will be able to use these electronic documents for trade financing and we can effectively eliminate the risk of 1/3  BIS central bankers' speeches  fraudulent MTBLs. More broadly, the greater use of electronic trade documents will make verification checks easier, reduce the incidence of fraud and human error, and ultimately lower costs. But to achieve this, all stakeholders need to adopt digital tools and upgrade their trade practices.