As the global economy gains momentum, staying the course on these policies will be decisive to achieving escape velocity. The United Kingdom is at the centre of these decisions. Let me expand. 2. Financial reform  In recent years, protectionism has been the dog that didn’t bark. Although gently mocked, the G20 pledge to resist protectionism has been largely respected. In contrast, some major trade deals have been signed (such as between Canada and Europe), and other even more significant ones are in train. The UK can help spur on the Transatlantic Trade and Investment Partnership discussions on wide ranging free trade between the EU and the US. In tandem with keeping the global trading system working is the re-founding of an integrated, open global financial system. As the leading global financial centre, the UK will be central to completing the job of financial reform. The UK financial system is both a global good – it supports an open global system – and a national asset. To realise its potential, we need our system to be safe, fair and to act 2  BIS central bankers’ speeches  with integrity. Without those foundations, the innovation for which finance in the UK is renowned will be meaningless. A safe system means resilient banks and markets that together can absorb rather than amplify shocks. Much has been achieved in recent years to repair the core of the banking system. Minimum capital requirements for the world’s largest banks have been increased seven-fold.
2  All speeches are available online at www.bankofengland.co.uk/speeches  2  In part, the deceleration of the global economy reflects the shift from accommodative to tighter financial conditions that occurred initially in emerging economies, then in most advanced economies, and finally and sharply in the United States (Chart 2). Last year, the returns on all major asset classes from equities to credit to sovereign debt were negative. Cash once again was king. Chart 2: Global financial conditions indices tightened over 2018 United Kingdom  Standard deviations from historical average  8  United States  7  Emerging Market Economies  6  Global  5 4 3 2 1 0 -1  -2 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sources: Bloomberg Finance L.P., Eikon by Refinitiv and Bank calculations. The tightening of financial conditions globally partly reflected the usual – if somewhat delayed – reaction to the tightening of monetary policy.1 Over the past year, the withdrawal of monetary policy accommodation gathered pace. The Fed raised interest rates four times, and the Bank of England and ten other G20 central banks also tightened policy. In addition, after five years in which there was no new net issuance of G7 government debt, new government borrowing outweighed central bank purchases by more than $ trillion for the first time since 2012. Potentially more seriously, the slowing in global momentum may also be the product of rising trade tensions and growing policy uncertainty.