The financial system is safer, simpler, and fairer. The financial system is safer A central achievement has been the transformation of banking. A decade ago, banks were woefully undercapitalised (some were levered over 50 times), with complex business models that relied on the goodwill of markets and, ultimately, taxpayers. Large global banks are now considerably stronger. They can stand on their own. With capital requirements for the largest that are ten times higher, banks have raised more than $ trillion of capital. And they are disciplined by a new leverage ratio that guards against risks that seem low but prove not. 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  Banks are also more robust because they have changed their funding models, not least due to new global liquidity standards. The financial system is simpler The system is simpler in part because, a decade on, banks are less complex and more focused. They lend more to households and businesses, and less to each other. Business strategies that relied on high leverage, risky trading activities and wholesale funding are disappearing, as intended. Trading assets have been cut in half, and interbank lending is down by twothirds. In parallel, the system is simpler because a series of measures are eliminating the fragile forms of shadow banking while reinforcing the best of resilient market-based finance. A decade ago, off-balance-sheet vehicles masked enormous leverage. Monoline insurers supported unsustainable debts, and banks became overly reliant on fragile short-term funding from money markets.
By the 2018 G20 Summit in Argentina, the FSB will report whether any additional financial resources are required to resolve safely CCPs. The financial system is fairer The system is fairer because of reforms that are ending the era of “too big to fail” banks and addressing the root causes of a torrent of misconduct. A decade ago, large complex banks operated in a “heads I win tails you lose” bubble. They privatised profits in the run-up to the crisis before socialising the losses when the music stopped. The loss of confidence in private finance that crystallised in the autumn of 2008 could only be arrested by public support over the following year that totalled $ trillion in bail-outs, government guarantees of bank liabilities and special central bank liquidity schemes. 9  To bring back the discipline of the market and end reliance on public funds, FSB members have agreed standards to ensure that major banks can fail safely in future. 7  Such collective investment vehicles with run risk now account for almost two-thirds of identified shadow banking up from about 40% prior to the crisis. 8 Work on liquidity mismatches in open-ended funds is scheduled to be completed by end-2017 and development of consistent leverage measures by the end-2018. The FSB has now completed its work under the Shadow Banking Roadmap. It has not identified new shadow banking risks that require additional regulatory action at global level.