There are therefore compelling arguments in favor of a generally positive assessment of the consequences of innovation. Does experience provide support for these arguments, or are these changes too new for us to know? The recent changes in credit markets have been dramatic. We have seen rapid growth of structured credit products, credit default swaps and new types of collateralized debt and loan obligations. Although these instruments are very new, they are the natural extension of earlier innovations in credit markets. Over a long period we have seen innovations ranging from the syndication of bank loans and the direct provision of credit through the capital markets, to the spread of asset-backed securities and products that separate different parts of the payments stream and different dimensions of the risk in a credit obligation into different instruments. These changes have contributed to a substantial reduction in the share of total credit held by banks. They have produced a greater separation or distance between the entity that first arranges a loan and those who end up holding the risk, and more intermediaries in that chain. And they have contributed to a dramatic increase in the number and diversity of creditors to any individual borrower, and a greater capacity to actively trade credit risk. BIS Review 29/2007  1  We are now well into the third decade of experience with the consequences of these earlier innovations, and this history offers some useful lessons for evaluating the probable impact of the latest changes in credit markets.
In this new environment, the Paris financial centre has obvious advantages, building on the very welcome measures announced in July by our Prime Minister to strengthen Paris’ attractiveness. To name a few, France has the biggest investment banks in continental Europe, the largest asset management industry and is the leading private equity investor; and French universities are renowned worldwide for the excellence of their finance teaching. And, last but not least, Paris will have the privilege of welcoming the EBA. Furthermore, the euro area has to keep control of the risks regarding its currency, the euro, and euro-based transactions. Some financial market infrastructures located in London, which are key for the EU, will soon become off-shore to the EU as a consequence of Brexit. This is particularly problematic when these infrastructures could put the EU’s financial stability at risk, as they represent 70% of the daily euro clearing business, equivalent to around EUR 930 billion (GBP 792 billion) in trades per dayi. This is the reason why the Commission proposed – and we support – a location policy for CCPs. Clearing activities in euro, for all those of “super-systemic” importance, must be located where the supervision of the Eurosystem can be exercised effectively. It is a matter of consistency for monetary policy and financial stability.