IOSCO is consulting on a set of metrics for measuring leverage. To be most decision-useful, these need to be consistent and comprehensive across countries. The upcoming FSB-IOSCO evaluation of implementation and effectiveness of recommendations to address liquidity mismatch in funds will be crucial to improve our understanding of best practice, including the merits of adjustments to redemption periods to be more consistent with investments. We are mindful that these decisions could have global as well as local implications. And we would welcome the IIF’s contributions to informing these judgements. The GFSN Better surveillance, a more resilient core of the financial system and a macroprudential approach to marketbased finance will all help increase sustainable capital flows, but they will be most effective if they are underpinned by an adequate GFSN. Pooling resources at the IMF is much more efficient than individual countries self-insuring against Capital Flows-at-Risk, distributing the costs across all 189 member countries. To maintain reserve adequacy in the face of future larger and more risky external balance sheets, EMEs would need to double their current level of reserves over the next 10 years – an increase of $ trillion. A better alternative would be to hold $ trillion in  Estimates are based on the FSB’s measure of ‘collective investment vehicles with features that make them susceptible to runs’, see FSB Global Monitoring Report on Non-Bank Financial Intermediation 2018.
Chart 8: EM foreign currency debt as a share of GDP Per cent of GDP 22 21 20 19 18 17 16 15 14 13 12 95  97  99  01  03  05  07  09  11  13  15  17  (a) Excludes China, non-bank borrowers only. Sources: IIF and BIS. Despite these vulnerabilities, the Bank’s analysis finds that, for EMEs as a whole, reforms to domestic institutional “pull factors” have substantially increased the sustainability of capital flows and so shifted the distribution of capital flows to the right (Chart 9), all else equal. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Chart 9: Pull factors have reduced Capital Flows-at-Risk for EMEs since the Asian Financial Crisis Probabilty density 0.12 0.10 0.08 0.06 0.04  B  A  0.02 0.00 -8  -6  -4  -2  0  2  4  6  8  10  12  14  16  18  Capital flows as a % of GDP 2008-2018 Post-2008 crisis  Asian Financial Crisis  Sources: IMF and Bank staff calcluations. Notes: Chart shows the contribution of pull factors to capital flows to EMEs during the Asian Financial Crisis (purple), and since 2008 (green). In both distributions push factors are held at their sample average, so only pull factors are changing. See chart 5 and annex for further details. Push factors Unfortunately for EMEs, all else has not been equal.