In this market segment, business is conducted bilaterally on an over-the-counter (OTC) basis – typically by phone or through electronic trading platforms like Tradeweb and Bloomberg that are based on the traditional request-for-quote model. The U.S. Treasury has issued a detailed request for information seeking public comment on the many factors that are affecting the structure and liquidity of the U.S. Treasury market, and is seeking comments on the relevant data gaps. 4 This is an important step that will help clarify what further work is needed in this area. Even in the corporate bond market where we have detailed TRACE transaction data, this still tells an incomplete story. TRACE data show what trades have taken place, not what trades have potentially been foregone because of any possible diminution of market liquidity. Gaining a better understanding of this phenomenon is being actively researched by my staff. In contrast to the market liquidity metrics such as bid-ask spreads, indirect evidence on market liquidity suggests that there has been a decline. Asset managers report that large blocks of securities are now harder to buy and sell without generating significant movements in prices. Also, average trade sizes have decreased (Exhibit 4) and there is evidence of a growing bifurcation in the corporate bond market, with greater activity and liquidity in those bonds that were issued more recently, larger in size or brought to market by larger issuers.
Lending and provisioning standards, reporting requirements, minimum capital adequacy and customer due diligence requirements are among the key areas in which there is still little formal distinction made to address the impact of such regulations on the access to financial services to low income households and small borrowers. 2  BIS central bankers’ speeches  Global standard setting bodies therefore have an important role in accelerating the conversion of proportionality principles into practice. This will also be important in the assessment of national financial systems and how it measures up against global standards. For example, under the Financial Sector Assessment Programme (FSAP). Therefore, there are significant benefits to be gained from the provision of guidance to authorities on how regulation can be assessed for its impact on access. Such considerations could also be reflected in the methodologies adopted by international bodies for financial sector assessments and peer reviews. The capacity and capabilities of authorities to provide supervisory oversight financial activities that target the underserved is equally important. Our experience has been that the supervisory skillsets required to evaluate the effectiveness of controls over microfinancing and microinsurance operations differ substantially from those traditionally applied to the retail portfolios of banks and insurance companies. A greater understanding of the product design implications, the relationships that a financial service provider has with its customers and the different motivations that drive consumer behaviour will be important. This is to avoid counterproductive supervisory actions on financial access.