The effects on the international financial system were thus slight, although the crises affecting both Asia and Russia led to extensive redistribution of wealth and political tumult in the countries concerned. There are probably several reasons why the effects were so limited. One is probably that economic policy has become more predictable in many countries in recent decades, with sound public finances and stable, low inflation. The markets should therefore be less sensitive to shocks. However, another reason is actually that the financial system has become more resilient. The fact that risks have a better spread makes the system more stable. The risks are also transferred to the agents who want them or should have them. There is also the fact that the banks have gained more experience of operating in deregulated financial markets. The development towards more market-based transactions means that banks can now concentrate on the risks they are best at managing. They have also become better at managing them, with well-developed risk management methods and models. So far, so good. A better spread for risks and improved risk management can contribute to better absorption of shocks to the financial system. On the other hand, there can be elements that increase the risk of more serious shocks that also spread throughout the whole system. …or have they become more prone to risk? One such tendency could be an increased propensity among market agents to take greater risks and to copy others’ actions.
If we do this what will we call it? We thought perhaps we could go for: “strong and simple”. I rather like this, but perhaps others will say it is clear why we are not in the advertising industry. Simple design  In designing a strong and simple regime we will have to decide on two things:   first, which firms are in it; and    second, how to simplify requirements. On the first of these, size measured by total assets is likely to be one good proxy – not least because it is simple. But other factors could also perhaps be brought in. For instance, purely as an illustration we could consider making eligible all firms with total assets of less than £ and who are also:   not systemically important;  6 In fact, the Financial Services and Markets Act 2000 (as amended) is explicit that it is not our role to ensure that no firm fails. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6    not internationally active;    not involved in trading activities;    not approved to run an internal model for capital requirements; and    capable of exiting the market in an orderly way, for example through solvent wind-down or an insolvency procedure. Now I’m quite sure that our disgruntled bank chair will be spluttering over their coffee at one or other of the items I just listed.