They would state that that the ultimate responsibility for the crisis rests with monetary policy. Specifically, according to this view, by keeping interest rates too low for too long a time, central banks have tolerated – or even condoned – the build-up in risk and financial imbalances. They “created”, so to speak, the credit bubble which burst in 2007. Let me state clearly that I don’t share this view. It is very apparent that some features of recent financial innovation – including securitisation – have contributed to excessive risk taking and increased financial fragility. They explain why the crisis has been so severe. It is also striking that real – not only nominal – interest rates have stayed at low levels for an extended period of time. Over the medium run, long term real interest rates are beyond the control of monetary authorities. They have been driven by the continuous increase in saving rates which occurred over the last decade, especially in emerging economies. This created a demand for safe and liquid assets which could not be met by equivalent supply in those countries. Because of this “asset shortage”, saving flows were directed towards industrialized countries, first of all the USA. At the same time the financial system in those industrialized countries worked to produce “complex” assets which looked safe and liquid – and were rated as such. Apparently, supply matched demand. But we know now that this was an illusion. Complex assets were neither safe nor liquid.
Traditionally – and this is true of the industry globally – financial institutions dealt with business transformation through a simple hire-and-fire strategy: hire from the market people with the skills to do the new emerging jobs and fire those in jobs that have become less relevant. This strategy will no longer work. The combination of deep domain skills, broad lateral skills, and the digital skills of the future does not often come in a package. The superior strategy is to continually train, upskill, and transform the existing workforce. This calls for a comprehensive workforce transformation strategy that is closely aligned to the business strategy. All the industry CEOs that I have spoken to understand this well. Together, let us build an agile and responsive training ecosystem that will transform the financial sector workforce. Let me now invite Mrs Josephine Teo, Minister for Manpower, to deliver her keynote address. 3/3  BIS central bankers' speeches