Market News / Story
Financial resilience in an age of repeated shocks - speech by Andrew Bailey
bankofengland.co.uk ·
The financial system has so far weathered the latest period of uncertainty. But lower growth, repeated supply shocks and changing market structures mean that resilience cannot be taken for granted. The conflict in the Middle East has created major uncertainty about growth, inflation and interest rates. Existing vulnerabilities in sovereign debt markets, credit markets and asset valuations could crystallise together. The rapid expansion of financing connected with artificial intelligence has created new exposures, while incidents involving frontier AI have underlined the associated operational, cyber and financial risks. However, an important part of the story so far is economic resilience in the sense that recent supply shocks have hit the world economy at the same time as the potential growth dividends from AI have become clearer. Moreover, the story of the financial system so far has been one of resilience. Banking systems generally remain well capitalised and we are not seeing funding stress. Despite a succession of economic shocks and heightened volatility, most financial markets have continued to function without a major breakdown in liquidity or trading conditions. BoEs Bailey: Monetary Policy Needs An Unwavering Commitment To Returning Inflation To Target - We Must Strengthen The Resilience Of Core Markets - Greater Central Clearing, Appropriate Minimum Haircuts And Stronger Risk Management All Merit Consideration
