The majority of financial sectors are in foreign hands, well capitalized and well managed. Institutions from the EU are governing the largest financial institutions in the new member states. Introduction of the Single Passport policy will mean a change only de iure, not de facto. Foreign institutions that wanted to provide their services in the new member states are already present there. I do not expect any rush of new players to the new countries of the European Union. It is more probable that with increasing living standards of the population, the space for new financial products’ penetration will increase as well. I expect to see increased competition in this area, as already established institutions compete for new clients. It is unlikely that many new financial institutions will enter the market, because the market is already saturated, and players who had a strategic interest in Central Europe have already established themselves. Authorities from the new countries are already participating in committees and working groups established by the European Commission and European Central Bank, so that rules, as well as the policy thinking are being coordinated and harmonized. Challenges from the EU accession will therefore not represent any major risk.
For nearly 20% of companies the premium was more than 150bp. Today, in almost no case is it more than 150bp. (slide 5)  But according to the models used by banks to assess creditworthiness, based on company balance sheet characteristics, default probabilities have barely changed. 3  In global debt markets, investors seem to be willing to take the same risk for less compensation. Appetite for risk taking has increased. Now, coming closer to home, consider this:  2  That confidence is also apparent in measures of interest rate volatility implied by options and in the pricing of credit default swaps. These model assessments are submitted to Credit Benchmark, to whom I am grateful for permission to use the data (www.creditbenchmark.com) 3  4  All speeches are available online at www.bankofengland.co.uk/speeches  4  As I noted back in February, the premium on a basket of sterling-denominated investment grade bonds is close to zero.4 (slide 6)  While the average sterling-denominated investment-grade corporate bond has got riskier in recent years, with a longer duration and lower credit rating, this basket has a fixed composition. And the compression of the yield premium has been even more pronounced at the riskier (‘high yield’) end of the market. The focus of explanations of these developments, globally and in the UK, is often on QE.