The good news is that today isn’t the beginning of this process. Over the past seven years, a huge programme of reform has been underway to fix the fault lines that led to the crisis and to build more resilient sources of finance to serve the real economy.3 The UK has played a leading role, consistent with our position as the pre-eminent global financial centre. 40% of global foreign exchange trading goes through London. Half of all trades in OTC interest rate derivatives. Two-thirds of trading in international bonds. And more international banking activity is booked here than anywhere else. 2  Bank of England survey results. Bank of England survey results. Respondents were asked for their views on the statement ‘I believe that financial markets work in the interest of society’. Possible responses were: strongly agree, agree, neutral, disagree, strongly disagree. 3  See the FSB Chair’s letter to G20 Leaders, available at http://www.financialstabilityboard.org/2015/11 /financial-reforms-achieving-and-sustaining-resilience-for-all/. 2  BIS central bankers’ speeches  Great strides have been made in making the system more resilient. The banks that sit at the centre of many markets are safer, with capital requirements that have increased ten-fold and liquid assets on balance sheets that have risen four‐fold. A new, simple leverage ratio requirement protects the system from risks that we think are low but in fact are not. Banks’ trading assets have fallen by a third since the crisis, and their interbank borrowings have been cut by almost a half.
Banks’ newfound resilience has been demonstrated recently, as they have dampened – rather than amplified – short-lived but significant financial market volatility. And those banks must be resilient because they can no longer rely on the support of the state. This week the Financial Stability Board proposed to G20 Leaders a landmark agreement on the Total Loss Absorbing Capacity which is central to ending Too Big To Fail in the banking system. Once implemented, it will ensure that large financial institutions can fail without disrupting the financial system or calling on taxpayers to bail them out. The era of heads-I-win; tails-you-lose capitalism is drawing to a close. Complex webs of derivatives are being simplified and made safer. We are also working to turn the tide of ethical drift. Market benchmarks have been reformed to end abuse. Most importantly, market participants are being made accountable for their actions. Misconduct will be met with genuine penalties. By holding individuals accountable, authorities are ending the Age of Irresponsibility. The best in industry are playing a leading role, for example, by getting the FICC Markets Standards Board up and running. The Board will establish clearly understood standards, keep them up-to-date with market developments and promote adherence. In parallel, the Banking Standards Board is promoting higher standards of conduct and competence across the UK banking sector. To give these measures teeth, Her Majesty’s Government is extending the Senior Managers Regime to all firms in FICC markets and putting them on a common basis with banks and insurers.