Armed with this, we can consistently build resilience into the financial system well ahead of when that resilience is needed. The second theme is how we are keeping pace with a changing financial system. New research is enabling us to simulate the effect of economic downturns on the growing non-bank financial system. It has highlighted possible weak spots that need monitoring and some that need new standards of resilience. Keeping up with the economy  Disciplined macroprudential policy builds resilience to economic shocks into the financial system well before it’s needed. You don’t make cities near fault lines resilient to earthquakes by waiting until there are tremors that signal a quake may be imminent. That would be not just ineffective; it would be counterproductive, See Piet Clement, ‘The term “macroprudential”: origins and evolution’, BIS Quarterly Review, March 2010. Andrew D Crockett, ‘Marrying the micro- and macro-prudential dimensions of financial stability’, remarks before the Eleventh Conference of Banking Supervisors, Basel, September 2000. 1 2  2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  leaving the city with buildings under re-construction and surrounded by scaffolding and cranes just as an earthquake hit. The right approach, for building resilience to earthquakes into structures, and for building resilience to economic shocks into financial systems, is to focus not on tremors, but on the underlying vulnerability. By underlying vulnerability I mean how serious a quake – real or economic – could be if one occurred at any point.
student loans)  Percentages of households  NMG Survey  3.00  160  2.50  140 120  2.00  100 80  1.50  60  1.00  40  0.50  20 0 1994  97  00  03  06  09  12  15  18  Sources: Bank of England, ONS and Bank calculations. 0.00  91 93 95 97 99 01 03 05 07 09 11 13 15 17 Sources: British Household Panel Survey/Understanding Society (BHPS/US), NMG Consulting survey and Bank calculations. There has been a substantial reduction in corporate debt since the crisis as commercial real estate companies have repaired their balance sheets after over-extending them before the crisis (Chart 9). Banks  7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  and investors have had strong appetite for corporate lending but corporate debt has only just outpaced the growth of the economy (Chart 10).