(2011), "Risk off" 9  8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  To help gauge the role played by these factors, we can consider the historic relationship between house prices and fundamentals and how this relationship might have evolved in the decade since the crisis11. The blue line in Chart 6 shows how we might have expected mortgage debt to evolve following the crisis, based on the historic relationship between mortgage lending and fundamentals such as the housing stock and incomes. This shows underlying demand falling in the immediate post-crisis period. This reflects weaker fundamentals. And to the extent that households’ beliefs are shaped by recent trends – and there is good reason to believe that is the case - weaker expectations will be captured in weaker demand. This fall in demand could also reflect credit conditions. In the years immediately following the crisis Bank Rate remained close to zero, but the interest rate spreads over Bank Rate charged by banks and building societies, for new mortgages, were high. This meant that interest rates on new mortgage did not fall with Bank Rate. But, as is shown in Chart 7, from 2013 onwards, mortgage spreads fell and the cost of mortgage credit dropped to well below pre-GFC level. 11  I have borrowed this thought experiment from Geoff Meen. It makes a number of simplifying assumptions, notably that there would not be feedback from higher demand into house prices in the counterfactual in which credit is unconstrained.
Jon Cunliffe: Regulatory reform and returns in banking Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at Chatham House, London, 20 October 2014. *  *  *  On 13 October 2008 – just over 6 years ago – the UK government injected nearly £ of public funds to stabilise Royal Bank Scotland and Lloyds Banking Group. Parts of both banking groups had started the year in a precarious position, with swollen, highly levered balance sheets and a reliance on short-term wholesale funding. By October, losses had left them dangerously undercapitalised. Absent a resolution regime for dealing with failing banks, and given the importance of these two banks to domestic lending, the government was left with no choice but to inject public funds, bailing out the banks’ creditors. In the intervening 6 years the landscape of banking has changed beyond recognition. Some of this is due to a very different approach to regulation and supervision. Some is due to a very different commercial environment. And most important, there has been a sea change in public attitudes towards banking and bankers. Bankers should not expect to be popular. But the outburst of public anger that accompanied the crisis and its very painful and protracted impact on the real economy – families and jobs – has not abated much. The latest polls put public trust in bankers at nearly the bottom of the class – only marginally above politicians.