Hence the balance of financing sources will eventually have to shift. Policy makers have recognised the need for broader private sector participation. Long-term investors such as insurance companies, pension funds and sovereign wealth funds can be alternative sources of financing, as the life cycles of infrastructure assets match their long-term liabilities. However, these investors are not participating actively enough in the infrastructure space, especially in debt financing. I am sure we all recognise that there are many reasons including a lack of familiarity with the asset class and bespoke nature of infrastructure projects. Some see higher perceived political risks in Asia, and a limited range of investment instruments relating to infrastructure. To catalyse broader private sector participation to complement the traditional bank lending space, a few things could be considered. Firstly, we recognise that investors have varying risk appetites, and that the expertise to evaluate and undertake greenfield project risks still resides mainly with banks. Banks should therefore consider bringing in different types of capital at different stages as the risk profile of a project changes over time. For instance, transactions could be structured such that banks finance the construction stage of projects using their balance sheets, and the bank loan is then refinanced in the bond market post-construction. This way, institutional investors gain exposure to a steady stream of cash flows from operating projects, while banks can recycle capital to lend to new greenfield projects. There have been precedents in other parts of the world.
Financial stability is our common good, and we should also face a more subtle threat to it: debt complacency on a global level, in the context of accommodative monetary policies which will be less warranted in the near future. Global debt was already about 200% of world GDP before the crisis (2007), but is up to 220% today. Sound fiscal policies for public debt, responsible lending by financial actors for private debt and – if needed – macroprudential measures, should react against this debt complacency. 1/3  BIS central bankers' speeches  More broadly on multilateralism, we should continue to work together to preserve the world economic and trade order. We Europeans, shoulder-to-shoulder with Canada, Japan and others, must resolutely defend international economic relations based on commonly respected rules and multilateral institutions: we are all aware that an escalation of protectionist threats from the United States would dampen growth everywhere. The recent uncertainty is probably already having some negative effects on investment: you saw it in the British economy since the Brexit vote in 2016. And real tariffs would hurt more: according to most calculations including ours, a 10% increase in tariffs would diminish world trade by double digit figures, and decrease global GDP by more than 2%, starting in the United States. 2. The finance of tomorrow Let me now turn to my second point: the finance of tomorrow in an interconnected world.