8  For a more detailed review of the issues considered here see “The future of repo: ‘too much’ or ‘too little’?”, a speech by Andrew Hauser, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech665.pdf. 9  Estimates reported by the Basel Committee on the Global Financial System (CGFS) suggest that the combined impact of liquidity regulation and OTC derivatives reforms could generate additional collateral demand to the tune of $ trillion. Depending on the data used, that amounts to at least a third of the high quality collateral in active circulation today. But it is  4  BIS central bankers’ speeches  how to innovate. Investor expectations for liquidity are changing and models for risk intermediation should evolve in ways that reduce balance sheet usage. 4. Central banking in global markets  Central banks need to keep up. In particular, we can catalyse more efficient and effective private collateral management by backstopping private markets. 140 years ago in Lombard Street, Walter Bagehot expounded the duty of the Bank of England to lend freely to stem a panic and to make loans on “everything which in common times is good “banking security”.” Bagehot was particularly scathing on the Bank’s failure at that time to state a “clear and sound policy” on this general topic writing “...until we have on this point a clear understanding with the Bank of England, both our liability to crises and our terror at crises will always be greater than they would otherwise be.”10 140 years on, the Bank has a clear and sound policy.
Financial institutions with their extensive branch networks, qualified financial management officers and extensive experience in assessing the risks facing consumers are best positioned to increase the level of institutional capacity that can enhance financial literacy. We need to recognise our shared responsibility to equip the communities in our countries with the necessary skills and confidence in managing their personal financial matters. Collective efforts to develop institutional capacity to share information and knowledge about financial literacy across the region can also bring about mutually reinforcing results. Financial literacy needs to be elevated to a more important level on the national and international agenda for a greater shared economic prosperity. On that note, thank you for your attention. BIS Review 85/2005  3