Mr. Ed Sibley:

If will come in and add something from a microprudential aspect, which is also important. In the context that it is certainly plausible that we are closer to the next downturn, which we certainly hope is not as severe as the last one, than we are to the start of the financial crisis, it is really important that we recognise that as a risk. That is important context when we are talking about non-performing loans and the need for continued repair in the system to address that particular risk. If we go into the next downturn with a significant number of non-performing loans in the system it will be a problem from a prudential perspective. We also need to make sure that consumers are protected to the maximum in addressing that issue.

The other aspects we think about from a risk management perspective include looking differently at the business models of financial services providers today than we have done in the past. We are looking at them through the cycle. Are they sustainable over the long term? We have done a huge amount of work but there is more to be done in terms of resolution planning. How do we deal with failing firms in the system, perhaps not with the systemic issue but with individual firms? How do we make sure not only that there is sufficient capital in the system but that there is bail-in-able debt so that the first to feel the pain is not necessarily the taxpayer and that we can resolve firms in a way that does not cause significant externalities more broadly?