But I suspect he would have recognised well the way in which financial markets and the institutions that support them can generate and amplify stress in the financial system and how they can be subject to runs, fire-sales and contagion. This is a lesson we had to relearn, very painfully, eight years ago. The result has been a major programme of reform of the regulation of wholesale financial market firms and of some aspects of markets themselves. We are still in the process of implementing that reform programme. Again, I do not want to go into detail tonight. But, looking forward, two particular points are worth stressing. First, as far as the Bank is concerned, there will be no going back to the future. The great financial crisis reminded us that the failure of the financial system, though rare, is possible. Contrary to the received wisdom pre-crisis, we learned that greater scale, complexity and sophistication of financial markets can make the system more not less vulnerable. And it also taught us again the cost of systemic failure. . 8  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  8  Or to put it in banking terms, we were reminded brutally not only of the probability of default but also of the social and economic loss given default. For those charged with protecting financial stability, this lesson shifted our tolerance for risk. We are now much more aware of risks further into the tail of the distribution. And much more concerned to manage them.
Challenges for financial markets Speech given by Jon Cunliffe, Deputy Governor Financial Stability, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Authority Board  Association for Financial Markets in Europe Annual dinner, London Thursday 3 November 2016  1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  I am very pleased to have the opportunity to speak tonight at the annual dinner of the Association for Financial Markets in Europe (AFME). The Bank of England has throughout its history had a close association with financial markets and with the institutions that support them. Indeed, the Bank was instrumental in the creation in 1914 of one of AFME’s distant ancestors – the quaintly named Accepting Houses Committee. The outbreak of the First World War and consequent disruption of international payments threatened to bring down the London markets and the international merchant banks that supported them. The Bank enabled a moratorium on war disrupted payments and offered to purchase the war disrupted bills. One contemporary historian of the City hailed this as “the greatest evidence of London’s strength as a financial centre that could have been desired or dreamt of”. 1  Over the following century, the Accepting Houses Committee became the forum of the City’s most influential merchant banks; its members enjoyed the implicit backing of the Bank of England. The Committee eventually became part of the London Investment Banking Association which merged with the European part of SIFMA to create AFME in 2009.