credit crunch : causes, consequences & solutions by dr. peter wheale

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“Credit Crunch” : Causes, Consequences & Solutions By Dr. Peter WHEALE

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Page 1: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

“Credit Crunch” :

Causes, Consequences & Solutions

By Dr. Peter WHEALE

Page 2: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Major UK banks’ assets(a)

Sources: BankScope published by Bureau van Dijk Electronic Publishing, published accounts and Bank calculations.

(a) Excludes Nationwide due to lack of interim data.(b) IFRS break.(c) 2008 H1.

WHAT IS THE PROBLEM?

• A shortage of money market liquidity

• Confidence in the global financial system is lower than at any time since the World War II

• Lack of credit availability to business and households is presaging a world-wide recession

Page 3: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Long-run capital levels for US commercial banks 1840–1993

Source: Berger, A, Herring, R and Szegö, G (1995), ‘The role of capital in financial institutions’, Journal of Banking and Finance, pages 393–430.

(a) Equity as a percentage of assets (ratio of aggregate dollar value of bank book equity to aggregate dollar value of bank book assets).(b) National Banking Act 1863.(c) Creation of Federal Reserve 1914.(d) Creation of Federal Deposit Insurance Corporation 1933.(e) Implementation of Basel risk-based capital requirements 1990.

Page 4: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Sterling liquid assets relative to total asset holdings of UK banking sector(a)

Source: Bank calculations.

(a) 2008 data are as of end-August 2008.(b) Cash + Bank of England balances + money at call + eligible bills + UK gilts.(c) Proxied by: Bank of England balances + money at call + eligible bills.(d) Cash + Bank of England balances + eligible bills.

Page 5: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

WHAT CAUSED THIS CRISIS?

• Asymmetry of currency exchange systems and balance of payments disequilibria

• The growth of the emerging economies, particularly the export-driven economy of China and the oil and gas-exporting countries, has resulted in their amassing huge current account surpluses and foreign currency reserves

• Whilst Western countries, particularly the USA and the EU, has burgeoning current account deficits and paucity of foreign reserves.

• A global credit boom, originating in the US, fed by cheap money, abundant credit and, in the West at least, cheap imports and low inflation, encouraged unsustainable leveraging of banks’ assets – including collateralised asset backed securities (CDOs)

• As a high proportion of foreign currency reserves are denominated in dollars the US dollar has been supported by being effectively the global reserve currency and enabled the US government to sustain external deficits and lax fiscal policies.

Page 6: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Major UK banks’ leverage ratio(a)(b)

Sources: Published accounts and Bank calculations.

(a) Leverage ratio defined as total assets divided by total equity excluding minority interest.(b) Excludes Nationwide due to lack of interim data.

Page 7: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Major UK banks’ customer funding gap,(a) household saving ratio and foreign interbank deposits(b)

Sources: Bank of England, Dealogic, ONS, published accounts and Bank calculations.

(a) Customer funding gap is customer lending less customer funding, where customer refers to all non-bank borrowers and depositors.(b) Data exclude Nationwide.(c) UK household savings as a percentage of post-tax income.

Page 8: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Martin Wolf (Wolf, 2008) sums up the global crisis simply as:

• The high income countries with elastic credit systems and households willing to take on rising debt levels offset the massive surplus savings in the rest of the world.

• The lax monetary policies facilitated this excess spending, while the housing bubble was the vehicle through which it worked.

Page 9: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Mark-to-market losses on selected financial assets(a)(b)Outstanding Losses: Apr. Losses: Oct.amounts 2008 Report 2008 Report

United Kingdom (£ billions)Prime residential mortgage-backed securities 193 8.2 17.4Non-conforming residential mortgage-backed securities 39 2.2 7.7Commercial mortgage-backed securities 33 3.1 4.4Investment-grade corporate bonds 450 46.2 86.5High-yield corporate bonds 15 3.0 6.6Total 62.7 122.6

United States (US$ billions)Home equity loan asset-backed securities (ABS)(c) 757 255.0 309.9Home equity loan ABS collateralised debt obligations (CDOs)(c)(d) 421 236.0 277.0Commercial mortgage-backed securities 700 79.8 97.2Collateralised loan obligations 340 12.2 46.2Investment-grade corporate bonds 3,308 79.7 600.1High-yield corporate bonds 692 76.0 246.8Total 738.8 1,577.3

Euro area (€ billions)Residential mortgage-backed securities(e) 387 21.5 38.9Commercial mortgage-backed securities(e) 34 2.8 4.1Collateralised loan obligations 103 6.8 22.8Investment-grade corporate bonds 5,324 283.8 642.9High-yield corporate bonds 175 29.1 75.9Total 344.1 784.6

Source: Bank calculations.

(a) Estimated loss of market value since January 2007, except for US collateralised loan obligations which are losses since May 2007.(b) Data to close of business on 20 October 2008.(c) 2005 H1 to 2007 H2 vintages. The home equity loan asset class is comprised mainly of US sub-prime mortgages, but it also includes, for example, other mortgages with high loan to value ratios. Home equity loans are of lower credit quality than US Alt-A and prime residential mortgages.(d) High-grade and mezzanine ABS CDOs, excluding CDO-squareds.(e) Germany, Ireland, Italy, Netherlands, Portugal and Spain.

Page 10: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Major UK banks’ equity price dispersion and implied volatility(a)(b)

Sources: Bloomberg and Bank calculations.

(a) Data to close of business on 20 October 2008.(b) Data exclude Bradford & Bingley and Northern Rock.

Page 11: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Major UK banks’ and LCFIs’ credit default swap premia(a)(b)

Sources: Markit Group Limited, Thomson Datastream, published accounts and Bank calculations.

(a) Data to close of business on 20 October 2008.(b) Asset-weighted average five-year premia.(c) April 2008 Report.

Page 12: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Equity prices of distressed institutions(a)

Sources: Bloomberg and Bank calculations.

(a) Data to close of business on 20 October 2008.(b) Fannie Mae and Freddie Mac taken into conservatorship.(c) Lehman Brothers Holdings files for Chapter 11 bankruptcy protection.(d) Benelux, Icelandic and UK governments nationalise or take stakes in banks.(e) UK authorities announce comprehensive package of measures.

Page 13: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Three-month interbank rates relative to expected policy rates(a)(b)

Sources: Bloomberg and Bank calculations.

(a) Spread of three-month Libor to three-month overnight indexed swap rates.(b) Data to close of business on 20 October 2008.(c) April 2008 Report.(d) Fannie Mae and Freddie Mac taken into conservatorship.(e) Lehman Brothers Holdings files for Chapter 11 bankruptcy protection.

Page 14: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Major UK banks’ equity prices, mortgage lending and wholesale funding dependency(a)(b)

Sources: Bloomberg, published accounts and Bank calculations.

(a) Data to close of business 20 October 2008.(b) The size of the circles is proportional to the extent of equity price falls since 2 July 2007.(c) Wholesale funding reliance equals debt securities in issue and interbank deposits as a proportion of debt securities in issue, interbank deposits, customer deposits and Tier 1 capital.(d) Wholesale funding dependence was calculated at end-June 2008

Page 15: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

The UK mortgage market: key facts

• The British economy is known with strong cycles with direct effect on the housing market.

• In average the real house price rose by almost 2.5 per cent per year.• From 1997 to 2007 house price increased by 156% while average

income only rose by 35%.• The ratio of household debt to income rose from 100% in 2001 to 160%

in 2008.• There is higher house price volatility in the UK than any other major

EU economies, such as France and Germany.• The UK has a high level of mortgage debt, 60% of GDP.• The UK mortgage market is highly competitive and household spending

is positively correlated to the level of interest rate.• The rate of house ownership is high in the UK when compared to some

of the EU major economies.

Page 16: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

‘Credit crunch’ and the UK Mortgage Market

• Based on a study by the Royal Institute of Chartered Surveyors the UK housing market declined to the lowest level since 1992. IMF estimates that the average house price will fall by 20 to 25 percent by 2011.

• The number of mortgage products has declined steadily over 2008.• Many mortgage holders with high loan to value or income ratio are

facing financial difficulties due to the downturn in market conditions (i.e. inflation and unemployment).

• Default rate among mortgage holders is accelerating and may exceed government expectations due to global market turmoil.

• The market price of mortgage-backed securities has deteriorated and delinquencies in the housing market has mushroomed (IMF, 2008).

• The issuance of mortgage-backed securities fell substantially starting from 2007.

• The interbank spread is till high due to fear by banks over their exposure towards distressed mortgage-backed securities (IMF, 2008).

• Banks introduced tighter lending criteria and also increased their mortgage lending rates.

Page 17: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Average house price and percentage change across the UK, Quarter 3, 2008

ScotlandStandard Price: £134,380Quarterly Change: -2.1%Annual Change: -6.0% The North

Standard Price: £138,063Quarterly Change: -0.3%Annual Change: -9.3%

Yorkshire and the HumberStandard Price: £128,591Quarterly Change: -5.7%Annual Change: -14.2%

The East MidlandsStandard Price: £147,559Quarterly Change: -4.5%Annual Change: -13.1%

East AngliaStandard Price: £169,788Quarterly Change: -8.3%Annual Change: -13.3%

Greater LondonStandard Price: £269,723Quarterly Change: -7.0%Annual Change: -16.5%

The South EastStandard Price: £233,086Quarterly Change: --3.4%Annual Change: -12.2%

The South WestStandard Price: £185,691Quarterly Change: --5.6%Annual Change: -12.9%

Wales Standard Price: £139,267Quarterly Change: --12.5%Annual Change: -16.6%

The West Midlands Standard Price: £162,861Quarterly Change: --5.7%Annual Change: -9.5%

The North WestStandard Price: £137,487Quarterly Change: --7.1%Annual Change: -10.5%

Northern IrelandStandard Price: £172,762Quarterly Change: --4.2%Annual Change: -22.6%

Source: Halifax, quarter 3, 2008

Page 18: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Average house price across the UK Jan 2008 to Aug 2008

North Yorks & East Eastern Greater South South West North N.

    East Humber Mid   London East West Mid West England Wales Scotland Ireland UK

2008 Jan 150,353 167,039 175,791 238,333 350,169 277,972 228,644 179,199 164,168 228,804 170,151 162,801 225,978 221,130

Feb 148,105 163,555 172,753 237,245 336,928 273,453 224,360 179,648 161,454 224,464 165,542 162,013 222,955 217,089

Mar 149,888 161,270 172,619 237,097 340,167 274,493 225,513 177,011 160,255 224,668 166,484 163,687 217,413 217,344

Apr 150,174 164,643 170,335 237,197 342,301 275,835 225,476 175,493 161,646 225,419 164,041 166,511 225,657 218,264

May 147,314 162,370 168,909 235,792 345,936 270,314 222,001 174,158 161,393 223,818 163,280 165,641 216,341 216,625

Jun 147,195 164,552 169,019 232,126 336,545 270,262 220,113 174,002 159,449 221,763 162,168 167,577 220,199 215,029

Jul 147,965 161,798 169,809 235,616 343,182 271,677 222,467 177,474 162,664 224,207 163,202 167,220 221,447 217,171

  Aug 144,913 160,991 165,089 228,498 326,908 265,761 220,303 174,342 158,734 218,281 159,734 164,307 205,149 211,410

Source: SML, 2008

Page 19: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Inflation in the UK

                                                                                    

                                                                                                                                                                                        

Source: National Statistics, Sep 2008

Page 20: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

UK Unemployment

Source: National Statistics, http://www.statistics.gov.uk/cci/nugget.asp?id=12

                                                                                   

                                                                                                                                                                                                       

Page 21: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Mortgages and Remortgages: Fixed Rate Lending

    Fixed Number Fixed % of loans Fixed interest rate average

2007 Jan 115,300 70 5.27

  Feb 111,700 74 5.34

  Mar 142,000 76 5.43

  Apr 123,700 75 5.50

  May 141,500 76 5.55

  Jun 149,400 77 5.62

  Jul 149,200 77 5.71

  Aug 148,200 76 5.85

Sep 124,300 72 5.99

  Oct 125,700 68 6.09

  Nov 104,800 65 6.11

  Dec 78,500 64 6.10

2008 Jan 76,900 56 6.01

  Feb 66,700 52 5.94

  Mar 64,500 54 5.86

  Apr 80,600 59 5.80

  May 85,000 66 5.82

  Jun 83,500 69 5.86

  Jul 84,800 64 5.96

  Aug 67,200 58 6.12

Source: SML, 2008

Page 22: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Mortgages and Remortgages: Discount Rate Lending

    Discounted Number Discounted % of loans Discounted interest rate average

2007 Jan 16,600 10 5.53

  Feb 11,800 8 5.66

  Mar 12,100 6 5.66

  Apr 9,900 6 5.67

  May 10,200 5 5.77

  Jun 9,900 5 5.86

  Jul 9,500 5 5.98

  Aug 10,800 6 6.01

Sep 11,500 7 5.98

  Oct 14,600 8 5.95

  Nov 12,000 7 6.03

  Dec 9,100 7 5.92

2008 Jan 11,900 9 5.85

  Feb 14,300 11 5.74

  Mar 12,700 11 5.70

  Apr 12,900 9 5.65

  May 8,400 7 5.66

  Jun 5,600 5 5.81

  Jul 6,500 5 5.96

  Aug 8,600 7 6.01

Source: SML, 2008

Page 23: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Mortgages and Remortgages: Tracker Rate Lending

    Trucker NumberTracker % of

loansTracker interest rate

average

2007 Jan 26,200 16 5.51

  Feb 21,500 14 5.60

  Mar 24,900 13 5.61

  Apr 22,800 14 5.59

  May 26,000 14 5.75

  Jun 26,800 14 5.80

  Jul 26,800 14 5.99

  Aug 28,500 15 6.05

Sep 29,000 17 6.06

  Oct 35,100 19 6.01

  Nov 35,100 22 6.02

  Dec 29,900 24 5.91

2008 Jan 41,500 30 5.85

  Feb 42,100 33 5.77

  Mar 37,300 31 5.79

  Apr 37,700 27 5.70

  May 28,200 22 5.67

  Jun 25,600 21 5.75

  Jul 37,200 28 5.87

  Aug 36,500 31 5.95

Source: SML, 2008

Page 24: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Mortgages and Remortgages: Capped Rate Lending

    Capped Number Capped % of loans Capped interest rate average

2007 Jan 1,100 1 5.32

  Feb 1,000 1 5.56

  Mar 800 0 5.57

  Apr 1,200 1 5.66

  May 1,500 1 5.76

  Jun 700 0 5.83

  Jul 1,200 1 6.03

  Aug 1,100 1 6.12

Sep 700 0 6.11

  Oct 1,300 1 6.11

  Nov 1,100 1 6.12

  Dec 600 0 5.98

2008 Jan 1,300 1 5.95

  Feb 1,500 1 5.81

  Mar 700 1 5.72

  Apr 1,000 1 5.79

  May 1,100 1 5.67

  Jun 700 1 5.78

  Jul 400 0 5.82

  Aug 300 0 5.85

Source: SML, 2008

Page 25: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Mortgages and Remortgages: Standard Variable Rate Lending

    SVRs number SVRs % of loans SVRs interest rate average

2007 Jan 5,200 3 6.10

  Feb 5,000 3 6.13

  Mar 6,200 3 6.15

  Apr 7,000 4 6.09

  May 7,500 4 6.09

  Jun 6,300 3 6.28

  Jul 6,500 3 6.36

  Aug 6,300 3 6.50

Sep 5,800 3 6.57

  Oct 7,300 4 6.45

  Nov 7,400 5 6.49

  Dec 4,200 3 6.76

2008 Jan 4,500 3 6.48

  Feb 4,400 3 6.43

  Mar 3,600 3 6.50

  Apr 4,600 3 6.31

  May 6,000 5 6.31

  Jun 6,200 5 6.45

  Jul 4,000 3 6.39

  Aug 3,400 3 6.38

Source: SML, 2008

Page 26: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Average Monthly Base Rate Versus Mortgages and Remortgages Monthly Average Interest Rate

0

1

2

3

4

5

6

7

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Mortgages and Remortgages Monthly Average Interest Rate

Average Monthly Base Rate

Source: Bank of England and CML

Page 27: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Number of Mortgages and Remortgages,Jan 2007 to Aug 2008

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Source: CML, 2008

Page 28: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Mortgage market prospects

“weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009” (Michael Coogan, CML, 2008).

“Loans for house purchases remain subdued with first-time buyers under particular pressure," (Bob Pannell, CML, 2008)

Page 29: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

WHAT IS TO BE DONE?

• Restoring confidence in the global financial system is the most important task. A co-ordinated effort by central banks and their respective governing bodies is required to stabilise the financial system by providing adequate liquidity for international trade and economic growth.

• The British government has guaranteed £250 billion of debt issues from banks, extended £104 billion to banks through long-term “repo” agreements (bank loans covered by collateral such as bonds) and provided over £200 billion through a three-year special liquidity scheme - already more than twice the market value of all the FTSE 350 banks put together ( Davies et al., 2008).

• World-wide, central and national banks’ provision of public money to underwrite and support the global financial system amount to more than £5,000 billion, about 15% of global GDP.

• The Federal Reserve Bank has become the de facto world’s central banks’ banker and in October extended its international currency swap lines to provide liquidity in amounts up to $30 billion each to Brazil, Mexico, Korea, and Singapore.

Page 30: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

WHAT IS TO BE DONE?

• The EU has announced that it will participate in a joint financial rescue package with the IMF and the World Bank that will provide loan facilities totalling £25 billion to Hungary. In the coming months, almost certainly, yet more public funds will be needed before the crisis in the banking and financial services industry is resolved and the IMF has expressed its willingness to extend conditional credit to emerging market countries.

• Once this is achieved a global financial system of regulation and control needs to be put in place which precludes the systemic asymmetries and disequilibrium in world markets we have recently witnessed.

• Capital levels (which have been too low) need to rise; and capital needs to be of sufficient – banks need to reduce their leverage by at least one-sixth.

• Liquidity standards have been inadequate and should be strengthened to ensure that firms are sufficiently resilient to a range of shocks.

• The current UK legal framework for depositor protection and dealing with institutions in difficulties needs to be strengthened.

• International arrangements for managing crises at cross-border financial institutions should be developed further.

• Transparency should be improved through more informative disclosure, including the provision of more information on potential future balance sheet volatility, to strengthen market discipline.

• The scope for — and potential benefits of — developing centralised infrastructures for a broad array of over-the-counter instruments should be assessed.

Page 31: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Announced capital raising commitments from UK financial institutions(a)Current Institution’s capital raising commitments New Tier 1Tier 1 (£ billions): capitalcapital:(b) ratio

followingcapital

ratio common preference other dividend Total raising(per cent) effect (per cent)

Barclays 9.1 3.6 3.0 1.5 2.0 10.1 >11.0

HBOS 8.6 8.5 3.0 0.0 0.0 11.5 12.0

HSBC 8.8 0.75(f) 0.0 0.0 0.0 0.75 8.8Lloyds TSB 8.6 4.5 1.0 0.0 0.0 5.5 12.1Combined Lloyds TSB and HBOS 13.0 4.0 0.0 0.0 17.0

Nationwide 9.7 0.5 0.5 10.3

RBS(d) 9.1 15.0 5.0 0.0 2.0 22.0 12.1–13.1(i)

Abbey/ Circa 8 1.0 0.0 0.0 0.0 1.0 Raised by Alliance & Leicester 1.25

Total 51.4

Sources: Press releases, published accounts and Bank calculations.(a) Table updated to 24 October 2008.(b) As at 2008 interim results.(c) Data on a pro forma basis.(d) No dividends to be paid on ordinary shares until preference shares have been repaid.(e) HSBC group Tier 1 ratio.(f) Injection from HSBC Holdings plc to UK subsidiary, HSBC Bank plc.(g) Calculated using 2008 interim results plus capital raising commitments.(h) Combined group would pay no dividends on ordinary shares until preference shares have been repaid. The combined group will have a core Tier 1 ratio in excess of 8.5% after the capital raising.(i) As at full year 2007 results.(j) Intention is for additional capital to be raised through normal market channels between 13 October 2008 and Nationwide’s financial year end.(k) Calculated using full year 2007 results plus capital raising commitments.(l) Three to four percentage points improvement.(m) Equity injection by Banco Santander.(n) Percentage points.

Page 32: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Illustrative adjustment path for customer lending to reduce customer funding gap to 2003 levels(a)(b)

Sources: Dealogic, published accounts and Bank calculations.

(a) Data excludes Nationwide and uses Abbey data rather than Banco Santander.(b) Assumes major UK banks’ customer deposit growth is equal to the average annual rate since 2005.(c) Assumes 20% of the required adjustment in customer lending growth occurs in the first year, 30% in the second year, and 50% in the third year.

Page 33: Credit Crunch : Causes, Consequences & Solutions By Dr. Peter WHEALE

Key actions to improve resilience • Macroprudential tools are needed to guard against systemic risk and to ensure

banks are in a stronger position ahead of the next downturn.

• Capital levels have been too low and need to rise; and capital needs to be of sufficient quality to deliver higher levels of resilience.

• Liquidity standards have been inadequate and should be strengthened to ensure that firms are sufficiently resilient to a range of shocks.

• The current UK legal framework for depositor protection and dealing with institutions in difficulties needs to be strengthened.

• International arrangements for managing crises at cross-border financial institutions should be developed further.

• Transparency should be improved through more informative disclosure, including the provision of more information on potential future balance sheet volatility, to strengthen market discipline.

• The scope for — and potential benefits of — developing centralised infrastructures for a broad array of over-the-counter instruments should be assessed.