The G20 has agreed a wide range of regulatory standards and put in place the mechanisms for deep supervisory cooperation. These Financial Stability Board (FSB) reforms create a platform for cross border financial services between different legal systems and regulatory approaches that achieve similar outcomes for financial stability. This avoids unnecessary  25  See Carney, M (2016), ‘The Spectre of Monetarism’. Rodrik, D. (2011). The globalization paradox: Democracy and the future of the world economy. 27 See Carney, M (2017), ‘A Fine Balance’. 28 Sales are increasingly taking place on-line and over platforms, rather than on the high street. Intangible capital is now more important than physical capital. A hyper-connected, capital-light world, could offers a future that increasingly belongs to small and medium-sized firms, with platforms (such as taskrabbit, Amazon, Etsy, Shopify, and SamaHub) giving them direct stakes in local and global markets. 26  16  All speeches are available online at www.bankofengland.co.uk/speeches  16  duplication and costly fragmentation while promoting greater competition, enhanced resilience and improved efficiency to the benefit of all our citizens. Conclusion: Is this How the Expansion Ends? Although the economic and financial imbalances in the global economy do not yet appear to contain the seeds of their own demise, global momentum is softening. Monetary policymakers may need to be disciplined and macroprudential authorities, vigilant. Risks from China and from de-globalisation are significant and growing. Could they be how the expansion ends? Protectionism appears already to be having an impact.
This specific point highlights the more general progress that has been made improving the resilience of the core of the financial sector. Banks in most regions are now more likely to be stabilisers rather than amplifiers of shocks. Regulation has made banks less complex and more focused. They lend more to the real economy and less to each other. Trading assets have been cut in half, and interbank lending is down by one-third. And their resilience in most jurisdictions has been transformed. For example, UK banks have CET1 ratios of about 15%, more than three times their pre-crisis level. Their aggregate MREL is 26%. They hold £ trillion  21  Based on all widely traded CLOs in the US and Europe. 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  of high quality liquid assets, a four-fold increase over the past decade. And their short-term wholesale funding has fallen from 15% to 4% of balance sheets. There is also greater supervisory scrutiny, not least through stringent stress tests. Indeed, in the past few years, major UK banks have been tested against all the major risks I will cover today (from China to inflation scares plus a few others for good measure). The Story Thus Far While there are pockets of risk and global growth is still decelerating, the combination of the policy response and the state of the current imbalances in advanced economies suggest that global growth is more likely than not to stabilise eventually around its new, modest trend.