But, unconstrained, such a simulation would imply a potentially unbounded relationship between market capitalisation and a country’s GDP. Because market capitalisation is the discounted value of future profit streams from companies, that seems implausible. Charts 10 plots equity financial depth for the US and UK since 1929 and 1965 respectively. Between 1929 and 1990, the financial depth ratio in the US was roughly flat, at around 50%. As the US liberalised this ratio shifted upwards, averaging around 100%; it has remained roughly at these levels since. The UK has followed a similar pattern. To reflect these findings, in the simulations an (arbitrary) cap of 100% is placed on countries’ market capitalisation to GDP ratio, once they have reached current levels of US GDP per capita. 6  BIS central bankers’ speeches  Using the relationship in Chart 9 and the GDP projections, equity financial depth in the G20 countries can be projected forward. Many of the advanced countries have only a short distance to travel to reach 100%, given their starting point. Among the emerging G20, the average financial depth ratio rises from around 50% in 2010 to around 100% by 2050 (Chart 11). In other words, the pace of financial deepening in the emerging G20 countries is rather gradual. If anything, this may understate the likely pace of change. Nonetheless, these trends imply a rather striking shift in the composition of the global market portfolio.
3  The Future of Community Banks: Lessons Learned from Banks That Thrived During the Recent Financial Crisis by R. Alton Gilbert, Andrew P. Meyer, and James W. Fuchs all of the Federal Reserve Bank of St. Louis. 2  BIS central bankers’ speeches  characteristics across the successful banks? These characteristics are undoubtedly important and will be an essential element of success in the future. Some factors that one might think are important turn out not to be critical in determining performance. For example, asset size was generally not a factor in performing well during, and following, the financial crisis. Community banks that thrived varied in asset size – from below $ million, to as large as $ billion in assets. Geography, though, did matter to a degree. By definition, community banks are not geographically diversified, so those located in states that were most severely affected by the financial crisis and the recession faced the largest challenges. However, there are examples of banks that performed well in Michigan despite the severe economic problems that Michigan experienced; and there are examples of banks that floundered in Texas despite the solid economic performance that Texas experienced. Here in the Second District, while we had relatively modest declines in real estate values on average, some local areas saw house price declines as serious as in the worst hit states such as Arizona, California, Florida and Nevada. Recent research has identified several characteristics common to community banks that prospered during and following the financial crisis.