Jon Cunliffe: Is the world financial system safer now? Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Chatham House City Series conference on Global Financial Markets: new rules on market structure, trading and funding, London, 17 March 2014. * I. *  *  Introduction  On 17 November 2008, for the first time ever, the leaders of the G20 came together to try to find a way through the worst economic and financial crisis since the 1930s. As I sat there, in Washington, in the National Building Museum, Benjamin Franklin’s famous warning came to mind: “If we do not hang together, most assuredly we will hang separately”. That Washington summit, and the ones in London and Pittsburgh that followed in quick succession, were extraordinary in many ways. Most striking, there was no rancour, no finger pointing between the leaders of the G20. Rather, the dominant mood was that we were indeed “all in it together”, or in Franklin’s words, would hang separately if we did not hang together. And, in contrast to the familiar run of Summits and Councils and international meetings, from the outset, there was a powerful bias to action: “what can we do to counter this crisis?” And, also from the outset, “how do we make sure it cannot happen again?” History has already started arguing about whose idea that first G20 summit was.
Third, getting a handle on – and where necessary – regulating, the risks in the so called “shadow banking” system: the ecosystem of non-bank financial firms that perform a similar role in credit intermediation to that played by the banking sector. And fourth, and perhaps most important, making sure that no institution, no matter how large, how complex, how international in its activities or to put it simply, no matter how systemic, is “too big to be allowed to fail”. Because if financial institutions can make themselves too big to fail, if they can ensure that if and when they get into trouble the taxpayer will have no option but to bail them out if, as the economists put it, they can ensure that their profits and their pay are private but if it all goes wrong the losses are “socialised” then history teaches us that this is exactly what they will do. III. What has been achieved? So, in these four key areas, what has been achieved? The inputs have certainly been impressive. From a standing start in 2009 the Financial Stability Board has driven the regulatory reform programme. Under the FSB, around 25 groups have been set up to run around 15 major workstreams.