The Financial Stability Board’s Global Monitoring Report on Non-Bank Financial Intermediation 2018 shows that collective investment vehicles with features that make them susceptible to runs represent 71% $ trn) of the FSB’s risk-based narrow measure of non-bank financial intermediation. 17 See the November Financial Stability Report for a discussion of the similarities and differences between the current leveraged lending market and sub-prime lending in the run up to the crisis. Chart F.8 also illustrates which market actors are holding the collateralised loan obligations. 18 See FSB Plenary Press Release 19 IIF Global Debt Monitor. 16  10  All speeches are available online at www.bankofengland.co.uk/speeches  10  As published by the Bank in the past, the rate of growth and level have passed the points where other economies, advanced and emerging, have experienced sharp corrections in the past (Chart 1). Chart 1: China’s credit boom in a historical context Per cent of GDP 300 Danish financial crisis 250 Japan asset price bubble China credit boom Thailand (Asian crisis)  200 150 100  Spanish housing crash US subprime crisis  50 0  1980  1985  1990  1995  2000  2005  2010  2015  2020  Sources: BIS and Bank of England. The Chinese authorities have, since the start of 2017, taken material policy measures to de risk the financial sector and bring the growth rate of debt into line with the growth rate of nominal GDP.
The second risk that may arise after we have left the EU, is the related but perhaps more prosaic issue of the flexibility of the UK’s regulatory framework and allocation of responsibilities within it – the division of tasks between Parliament, Government and the regulatory authorities. Much of our financial sector legislation and regulation has been made at the EU level. This has increasingly taken the form of extremely detailed EU primary and secondary legislation directly applicable in Member States.4  This approach has been justified as necessary in the EU by the need to prevent divergences between member states. The cost, however, as some have observed, is an over complex and rigid regulatory framework.5 As a preparatory step for Brexit, Parliament has ‘onshored’ EU legislation and regulation and also the allocation of responsibilities that lie behind it. At some point, post Brexit, we will, I think, need to address this rigidity and hard wiring of detail to ensure we have a coherent, effective and flexible regulatory system with appropriate accountability. How we do that will have an impact on how we address risks, at firm and at system level, in a fast changing financial system. Financial stability post-Brexit With that nod to the future, I will leave Brexit - for today at any rate – and turn to the examination question you have set for today – financial stability post Brexit. I would like to focus on the question of debt.