So our focus is on non-banks; on insurance companies, pension funds and investment funds of all sorts. The jury is out here too. I do not start from the presumption that there is an iceberg here. Our duty is to assess whether they could be one. 16  Carney, M. (2013), ‘The UK at the heart of a renewed globalisation’, available here. Even a user of derivatives to hedge another exposure – and thus having limited ‘VaR’ – could find themselves with significant ‘CaR’. It is the potential mismatch in liquidity, between the collateral called for and the assets held that is a source of firesale risk. In addition, as the IMF reports for a sample of funds, the majority of derivative exposures are entered into in order to boost returns rather than hedge existing risks. This would boost both VaR and CaR. 17  9  All speeches are available online at www.bankofengland.co.uk/speeches  9  But in order to assess properly the risks in this area we need much better diagnostic tools. So we are developing them. We are fortunate in being able to draw on data from Trade Repositories which now record all new derivative trades between counterparties and report each day on the outstanding positions between them. We are fortunate that these issues are the topic of international collaboration, with the International Organisation of Securities Commissions leading work to develop consistent measures of leverage – that incorporate derivatives usage – for investment funds.
John Gieve: The City’s growth – the crest of a wave or swimming with the stream? Speech by Sir John Gieve, Deputy Governor of the Bank of England, to the London Society of Chartered Accountants, Bank of England, London, 26 March 2007. *  *  *  Introduction Over the past few months there has been renewed talk of London overtaking New York as the world’s leading financial centre. And it has reflected fears in the US as much as self congratulation in this country. We should take some of this with a pinch of salt. Talk of an external threat may be helpful to those building a case for change in the US financial system. The US market remains the biggest in the world by many measures. More fundamentally this is not a zero sum game. Even if London establishes a comparative advantage and gains market share, New York (and Paris and Edinburgh for that matter) can prosper too. Yet something interesting is going on. The report by McKinseys commissioned by Mayor Bloomberg concluded that “London is transforming itself into an increasingly sizeable and attractive talent hub for people with … skills that used to be available only in New York …” and “… superior conditions for innovation, capital formation, risk management and investment in these markets [derivatives and debt financing] are beginning to emerge (or have already done so) in London, which is building momentum relative to New York”.