Notes: A dataset of around 600 paragraphs from each of the following sources was used. Banks – a mixture of terms and conditions and various reports from Barclays, RBS, HSBC and Lloyds. BoE – a mixture of Bank of England speeches, reports and news content. AH – a selection of my recent speeches. Political speeches – the Leaders’ speeches from Conservative, Labour and Liberal Democrat party conferences in 2012 and 2014. One Tabloid and one Broadsheet newspaper were also included. These measures consider not only sentence length but also the number of polysyllables (words of three syllables or more) and the average number of syllables per word. In general a lower number signifies lower complexity, apart from the Flesch-Kincaid reading grade level and Coleman correct completion measures where a higher number implies lower complexity. For further details please see DuBay (2004). 18  BIS central bankers’ speeches  Chart 4 Average sentence and word length across publications Sentence length / words  26  Banks  24 22  BoE  Broadsheet  20 Tabloid 18 AH 16 14  Political speeches 4.2  4.4  4.6  4.8 Word length / letters  5  5.2  5.4  Source: Bank calculations. Notes: A dataset of around 600 paragraphs from each of the following sources was used. Banks – a mixture of terms and conditions and various reports from Barclays, RBS, HSBC and Lloyds. BoE – a mixture of Bank of England speeches, reports and news content. AH – a selection of my recent speeches.
A lack of reliable information resulted in excess risk-taking by many, perhaps unknowingly. Investors and banks believed they could pass on losses to others or expected the authorities to intervene in the event of failure. It is now widely recognised that the regulatory framework for financial markets was too weak. Increased ambitions with regard to regulating financial markets and new and better instruments are on the agenda. I will revert to this later. But let me start with the external environment. The world economy: Keeping one’s house in order provides robustness The global economic crisis in autumn 2008 was the biggest economic earthquake in our time. The following year, world GDP fell for the first time in generations. The crisis was triggered by an abrupt decline in the US housing market, but a tightly interwoven financial sector caused the problems to spread rapidly across countries and sectors. When the bubble burst, excessive optimism in the financial sector turned to deep pessimism. The flow of credit dried up. It became expensive and difficult for financial institutions to procure funding even though the problems had originated in asset value losses in a faraway region. Cross-border trade, which is dependent on well functioning credit channels, was adversely affected. Even an expansionary economic policy, with record-low interest rates, low tax receipts and strong growth in public demand for goods and services, could not prevent the downturn from deepening in many countries. However, it did help reduce its duration compared with the depression in the 1930s. Chart 1: Current account.