True Finance – Ten years after the financial crisis Speech given by Mark Carney Governor of the Bank of England Chair of the Financial Stability Board  Economic Club of New York 19 October 2018  I am grateful to Alice Carr, James Benford and Clare Macallan for their assistance in preparing these remarks, and to Paul Brione, Chris Ford, Alex Michie, Harry Jackson and David Nicholls for background research and analysis. 1 All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  I. INTRO Last week, global financial policymakers gathered in Bali for the Annual Meetings of the IMF and World Bank. These meetings came a decade after the global financial crisis, two decades after the Asian crisis, and three decades after the Latin American debt crisis. Anyone spot a pattern? Despite the past decade of financial reform, many are asking whether anything has really changed. I am going to argue today that such weary fatalism is at odds with reality. That the radical programme of G20 reforms has made the global financial system safer, simpler and fairer. That these measures are creating a system that can serve households and businesses in bad times as well as good. That true change is creating true finance, a system that can deepen financial inclusion, better meet the needs of ageing populations and help fund the transition to a low carbon economy.
And to protect the system from risks we think are low but prove not, banks are subject to a simple, minimum leverage ratio, which is robust to model risk. Regulation has made banks less complex and more focused. Business strategies that relied on high leverage, risky trading activities and wholesale funding are disappearing, as intended. Trading assets have been cut in half, and interbank lending is down by one-third.38 Not least due to new global liquidity standards, banks have changed their funding models and now hold substantially more liquid assets relative to the liabilities that can readily run. In the UK, such contingent liquidity has increased tenfold since the crisis. An anti-fragile system requires ending Too Big to Fail. But higher capital and liquidity requirements are necessary but not sufficient. Banks must also be able to fail without systemic consequences. A decade ago, large complex banks operated in a “heads I win tails you lose” bubble. They privatised profits in the run-up to the crisis before socialising the losses when the music stopped. The complete loss of confidence in private finance that crystallised in the autumn of 2008 could only be arrested by public support over the following year that totalled $ trillion in bail-outs, government guarantees of bank liabilities and special central bank liquidity schemes.