BIS central bankers’ speeches  5  Chart 2: Housing market activity 20  Thousands per month  Thousands per month  160  18  140  16  120  14  Housing transactions(a) (right-hand scale)  12  100  10  80  8  60  6  40  Housing starts(b) (left-hand scale)  4 2  20  0  0 2006  2007  2008  2009  2010  2011  2012  2013  Sources: Department for Communities and Local Government, HM Revenue and Customs, ONS and Bank calculations. (a) (b)  Number of residential property transactions in the United Kingdom with a value of £ or above. Number of permanent dwellings in the United Kingdom started by private enterprises up to 2011 Q1 (seasonally adjusted by Bank staff). Data for 2011 Q2 to 2013 Q4 have been grown in line with seasonally adjusted data for permanent dwelling starts by private enterprises in England. Chart 3: Business investment Percentage changes on a year earlier 30 ONS business investment  20 10 0 -10 -20 -30  Range of investment intentions surveys(a)  -40 2005  2007  2009  2011  2013  Sources: Bank of England, BCC, CBI, CBI/PwC, ONS and Bank calculations. (a) Includes survey measures of investment intentions from the Bank’s Agents, BCC and CBI, scaled to match the mean and variance of four-quarter business investment growth since 1999. Measures weight together sectoral surveys using shares in real business investment.
4 Among the key lessons are: •  the critical importance of liquidity, alongside capital, in managing and regulating banks;  •  the limitations of the models which underpin the valuation and rating of structured products;  •  the importance of disclosure on risk exposures and valuation practices for the maintenance of confidence and effective market functioning in times of stress;  •  the need to alter the adverse incentives that had developed in the distribution chain for mortgages including for originators to maximise the volume of loans, for the  2  Arguably the cash flow projection of losses of $ billion comes closest to the sort of provisions banks would be making if the loans had been held on their banking books rather than securitised and sold on. On that basis the losses currently projected would be only 50% of the Savings and Loans losses as a share of US GDP. 3  See “Financial stability and depositor protection: strengthening the framework”, Consultation Document, January 2008. http://www.bankofengland.co.uk/publications/financialstabilityanddepositorprotection080130.pdf  4  Private sector initiatives have also been launched. There are European industry plans to compile information on a variety of instruments including ABCP, ABS and CDO and to disseminate this to investors and other interested parties on a regular basis. See “Summary of European Industry Commitments to the European Commission regarding Transparency in the European Securitisation Market” (www.europeansecuritisation.com/Industry-letter-08Feb08.pdf). The Institute of International Finance (IIF) also has an active agenda of work, covering risk management, liquidity, valuation, ratings, and transparency. (See http://www.iif.com/press/press+releases+2007/press+46.php).