Much more importantly, and after a lot of detailed work across the Bank, the FPC has identified some big differences with the subprime boom. Post-crisis reforms mean there’s less opacity in the associated securities – investors know much more about what they’re buying in a CLO than was apparent, ahead of the crisis, in most Mortgage Backed Securities. The rates of securitisation are in any case much lower (30% versus 80%). Most critically, the banks – and particularly UK banks – have significantly less exposure. Subprime mortgages were often held in special purpose vehicles that were not formally on banks’ balance sheets but heavily financed by them. They still owned the risk. During the crisis UK-owned banks lost huge sums of money – far more than on comparable domestic lending – from their exposure to US mortgages,  12 A large proportion of leveraged loans have been used for M&A and leveraged buyouts, which effectively replaces equity with debt for the corporate sector as a whole. 16  All speeches are available online at www.bankofengland.co.uk/speeches  16  some of it directly, much of it via these constructed securities.13 Their exposure to CLOs is materially lower. Chart 18, reproduced from the most recent Financial Stability Report, shows that UK banks own only a small fraction – around 1% - of the overall stock. All this is important and reassuring. It means that the mechanisms that so amplified the impact of US mortgage defaults are much diminished, particularly for the UK.
Warwick Economics Summit – 4 February 2022 Twenty years later… and twenty years ahead  Speech by François Villeroy de Galhau, Governor of the Banque de France  Press contact: Mark Deen (mark.deen@banque-france.fr)  Page 1 sur 9 Ladies and Gentlemen, I am delighted to be with you today, though I would have preferred to actually come to Warwick and your world-renowned University. And I am deeply honoured to offer today, with this speech, the very first of the Persaud Lectures, launched this year by Professor Avinash Persaud – none other than the son of Professor the Honourable Bishdonat Persaud. I borrowed my title from the famous French writer Alexandre Dumas: Twenty Years Later was his sequel to the Three Musketeers. January 1st marked 20 years since the introduction of the euro as cash. And if central banking isn’t quite as much fun as the tales of d’Artagnan and his friends, our young currency has had a few adventures and it is worth drawing some lessons from them. I will then turn to the next twenty years and the two main transformations facing Europe. Before I plunge into this longer view, allow me to say a few words about the European Central Bank’s latest monetary policy decision as set out by ECB President Christine Lagarde. Yesterday, in the face of increasing uncertainty on inflation, our key word was « more than ever » optionality.