And this resilience had a reason. It created the confidence for banks to finally get lending again …  It has allowed some turbulence to be withstood too. Cast your minds back to July 2016. In the wake of the referendum, markets were pricing in a severe downturn in the UK economy and property markets. 3  Financial crises often lead to a long run reduction in GDP, with a persistent decline in output relative to pre-crisis trends. Bank estimates based on the impact of historical financial crises in a sample of advanced economies, reported in Brooke et. Al. (2015), suggest that the average cost of a financial crisis has been 73% of GDP, which translates to a cost of roughly £ per capita if a financial crisis had taken place in 2016. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Bank and property company share prices were consistent with a rise in unemployment to 7.5%, falls in residential and commercial property prices of 15-20% and a cumulative 4% reduction in GDP growth. But banks had been tested – in public – against a shock twice as severe as that. So confidence in the banking system was maintained. Remarkably by past standards, banks’ funding costs moved very little. We were able to do the opposite of what regulation had typically done in the past: we could release, rather than build, bank capital. Banks didn’t need to rein in. And credit continued to flow.
2  BIS central bankers’ speeches  Next-generation SIC payment system The thoroughly redesigned SIC payment system known as “SIC4” came on stream in April 2016. Based on cutting-edge, forward-looking technology, this new system reinforces the principles of security, reliability and high performance that have proved their worth for more than 30 years. It is particularly crucial for Switzerland’s finance industry that transactions can be effected with the highest possible levels of security. The SNB therefore welcomes the fact that the former security infrastructure for accessing the SIC system has been overhauled and that a tailor-made security solution will be used from now on. A large proportion of cashless payment transactions in Swiss francs is settled via the SIC system. In 2015, SIC settled a daily average of approximately 1.7 million transactions worth CHF 154 billion, including both client and interbank payments in Swiss francs. Moreover, SIC is an important system through which the SNB implements its monetary policy. We therefore have a keen interest in the ongoing development of the SIC system to ensure that it is able to meet changing technical and professional requirements. BIS central bankers’ speeches  3  4  BIS central bankers’ speeches  BIS central bankers’ speeches  5