 Rwy'n cael ei fod yn ei gael am ymddi'r ddweud i'r ddweud. Rwy'n cael ei ddweud i'r Liviau, Stefan, Ylund a'r dechrau i'r ddweud, bydd e'n gwybod ychydig iawn i'r ddweud i'r cyffredin. Felly'r ddweud i'r ddweud i'r ddweud i'r ddweud i'r ddweud i'r cyffredin, eich hwn yn fuddur mewn cyfaddon. I'm an academic now rather than a central bank staffer, so I'm going to try and use that prerogative to be a little bit provocative with you. And this is offered in the spirit of trying to make your conference interesting, give you some food for thoughts over the next day and a half. So, yeah, let me start by, I guess, giving you some context of why I think this is an interesting question to ask right now. So my perspective on this is macro-pru is like one of the big ideas that came out of the global financial crisis over a decade ago now. You know, one way of trying to kind of explain what this was about is we saw a massive build-up of systemic risk that just went completely unchecked at the system-wide level in the early 2000s. And we needed someone to kind of take a step back and say, hang on, there's just too much risk taking. So that's really in simple terms what macro-pru was designed to be to achieve. And, you know, there's a number of really nice papers in the literature that documents how widespread the adoption of macro-predential frameworks has been around the world. So this is something that's got a lot of traction, I think, it's been used a lot. The one committee that I know best, the UK Financial Policy Committee, is 10 years old on a de jure basis. It's older than that, it's de facto. It's been operating since 2011. So I think this is a really good time for us just to take a step back and say, is this working how we intended when we set this thing up? Let me put it in a nice way. Have we achieved as much as we might have expected over this period in terms of developing the framework? Are there things that need a rethink? So that's going to be the kind of theme of my talk. Actually, before I do this slide, I will just, I hope this goes without saying, but this isn't about a portioning blame in any way. So as a central bank staffer from the majority of this period, I'm as responsible for anyone else. This is mainly just trying to say, what can we learn from this experience? How can we make it better? So I'm going to try and divide my talk up into these four questions I have on the slide. So the easiest question is like how active have macro-pronential policymakers been? So I'll show you some evidence on that. I'm then really going to focus on question two, which is what's the incremental impact that macro-prue has had over and above all the other reforms that happened after 2010? But I want to kind of underline and highlight the word incremental there. That's what I'm interested in. Imagine we had not set up the UK FPC, the ESRB, all the bodies that you have in your countries that perform similar roles. What difference would that have made to financial cycle dynamics, financial system resilience? My answers to those first two questions are going to be firstly on how active they've been. I think they've been pretty active. I'll show you some evidence, but these are not committees that have just sat on their hands. A lot of policy announcements have been made. My answer to the second question is going to be a negative. So I think it's quite hard to make a claim that these committees have actually affected financial system resilience in a material way. I'll explain that. Then the last part of my talk will try and it's a little bit more speculative, but I'll try and give you my reasons for why I think there's been a lack of action. And then I'll end with some suggestions for what we need to see going forwards. I hope that sounds okay. So let's start with the easiest of those questions, which is how active of these committees been. I'm going to focus on what I'm going to call discretionary policies. So I'm not at all interested in whether Basel III buffers have been implemented, whether the LCR was implemented. What I'm looking for is what policies have actually been introduced in response to judgments about the risk environments where these committees said, well, risks are higher than we thought we need to tighten policy or vice versa. So that's the kind of focus. Then I'm going to try and make two distinctions, which I think are useful. So firstly, it's interesting just to know how these bodies operate. Is it mainly through recommendations, soft policies or harder policy actions? So I'll share some evidence on that. And then I'll try and distinguish between frequency and intensity in terms of what we've seen. All right, so there's many versions of this type of chart I could have shown you. I'm going to focus on two bodies that I think I know reasonably well, so UKFPC and ESRB. They have different powers. I hope it's big enough to see on the screen here. So I'll focus on the left to start with the UKFPC. So I've just gone back through the Bank of England's record and whenever they've said they've done something, it appears in this chart. So the light blue bars are recommendations by the UKFPC and the dark blue are hard powers. All of those hard powers are relating to bank capital, so they're mainly about CCYB actions. There's a handful of leverage ratio actions there as well. So big picture, what do I get from that chart? It looks to me like the FPC was very, very active initially when it was set up. That's because we had a capital shortfall arguably. You can debate that in the UK at the time and the committee felt the need to bolster levels of UK banks capital. So you got a ton of recommendations early on. After, say 2015, it's settled down and we get something like two to four recommendations a year. That seems to be how the FPC is operating or one per quarter that it meets. Then ESRB, so they obviously have different powers. They don't have hard powers, so it's a more complex structure. The time profile is quite different there, but it looks to me again that the ESRB has been much more active since 2015 actually. But the big picture I want you to take from this is both of these committees. They haven't been sitting on their hands. There's been a lot of action in terms of announcements of policies. I think it's also interesting to ask where the boundaries lie. So which countries have pushed these tools furthest? Some of you may have superior information, so I've been using the ESRB's database, which is fantastic. So if I've left something out, do tell me. But it seems to me that if I think of the CCYB to start with, there's a bunch of countries now that have set two to two and a half per cent buffers, predominantly Scandinavian countries. Within the EU, something called the systemic risk buffer, a flat additional buffer. Again, it's Scandinavian countries that are paving the way there. Risk weight floors, Norway, I would point out is the exception. And then on the mortgage debt side, which is the other kind of big plank where we've seen a lot of macro potential action. To my mind, Ireland is the kind of poster child hearings of the country that's pushed these tools furthest. So if you want to take out a mortgage as a second buyer, the first time buyer in Ireland, the maximum loan you can achieve is three and a half per cent, your gross income. So I think that's the limit in terms of what's been where these policies have been set. It's a big picture. We've seen a lot of action on the policy side. So let's turn to the harder question. What impact have these policies actually had? And I'm going to split the discussion up into impact on bank resilience, impact on household balance sheets, and lastly the impact on call it shadow banking or call it market-based finance, whichever of those terms you find less offensive if you like. So let's start with bank resilience. I'm going to put this in a very strong way to make the point. So I think it's implausible to think that discretionary macro potential policy has had a significant effect on the resilience of banks. And I'm going to, you know, there's going to be some exceptions to that statement, but I draw that conclusion for three reasons. So firstly, some big countries just haven't used these tools, US and China being the obvious examples. Other countries have been using these tools but really in fine-tuning mode. Germany famously said a 0.25% CCYB before Covid. I think it might be 0.5% now, but these are kind of small adjustments. But the main reason I draw this conclusion is that even a 2.5% CCYB is going to barely register for an internationally active bank in terms of how much resilience it's delivering. And I've got just a simple chart to illustrate this point. So this is from Barkley's pillar three disclosure this year. The chart on the left is their risk-based capital metrics. One of the rights is leverage. So the numbers you can see here on the left are risk-raised assets, which are around $340 billion sterling. CT1 capital is $46 billion. And then I think if you're being really generous, the maximum amount you could attribute to the CCYB is just over a billion there. So the reason is only a bit of whatever the UK is doing is feeding through into its CCYB rates. It's even starker in leverage space. It's just over $2 billion against exposures of Barkley's of $1.2 trillion. So it's peanuts is what I take from this. In the UK context, I think it's actually a bit stronger than that. So the UK explicitly offsets what it did with the CCYB with reductions in pillar two requirements, you know, just what happened. So there was actually by design zero impact on overall bank capital requirements as a result of these policies debate whether that was right or not. I think you could even make the case that we would have had higher capital requirements in the UK had it not been for the UK FPC because it saw its role as providing a macro envelope for capital. So that constrained the degree to which micro-prudential requirements could be tightened. I'm not judging here whether that was right or wrong, but just that is what happened again. So let's turn to household balance sheets. I think this one's a little bit harder. So there is substantial, very good empirical evidence now on the conditional effects of changing LTV requirements, changing LTI, these kind of mortgage debt limits. And let me again underline the word conditional here. So that includes, I should say, by Oscar, who's going to be my discussant in a second, he has very nice work on this. And I think a typical finding in that literature is when you tighten LTV requirements or LTI, you end up with a reduction subsequently in credit growth to households and in house prices. And these effects, they tend to be larger for emerging markets, and they tend to be larger for more of the demand side tools like LTV compared to bank capital. So, oh yeah, there's a little chart that kind of illustrates, you will have seen this type of evidence before I suspect. But this is from, I think, one of the nicest papers in this literature by Alan Metel from the IMF using their database to look at the impacts of LTV changes. And they show that, you know, in a plausible identification, you get an effect on household credit growth and consumption growth. So I'll use a cliche from UK advertising history that some of you might be familiar with. So the evidence here, I think, says that macroprudential policies do what they say on the 10. So when you tighten these tools, you see a subsequent effect on credit growth and house prices. Now that's a different question to whether we've actually used these tools aggressively enough to steer household debt limits to a place that is correct or not. And I think the evidence there is not so compelling. So the chart on the left shows you the evolution of household debt to income ratios across a large number of countries over the last 10 years. So I've basically rebased every country's household debt to income ratio to 100 in 2013. And then you're looking at the range and the mean and the interquartial range as well after that. So basically the average country hasn't seen any deleveraging from households since 2013. That's the red line. Some countries have delevered a significant amount, others have levered a significant amount, but on average it's been zero. Now you could say, well maybe the countries that have delevered have been the ones that have been using macroprudential policies a lot. So that's the chart on the right. So it kind of takes those changes in household leverage and compares them to the borrower based actions in the IMF's fantastic IMAP database. And you basically get zero correlation between those two things. Now I realise there's a lot of endogeneity going on here, but just as a big picture point, there's no correlation between the usage of macroprudential policy here and outcomes in terms of household debt. Now I think that probably is the right answer. It's corroborated, I should say, by the way that some macroprudential authorities describe their own actions. So this crisis from a review that the UK FPC made in 2017. So it was kind of looking back and saying what's been the impact of the policy actions we've taken on LTI and DSR. And their conclusion was these policies have only had a modest impact on household mortgage lending. And moreover actually they're really there to ensure against the deterioration in lending standards rather than to affect debt at present. So I think that's again consistent with this story that we haven't really had a big impact. Then I'll finish this part with what the evidence, this is the easiest bit, what's been the evidence on the impact on the resilience of shadow banking or market based finance. So you all know this in the room. We haven't really done anything in terms of policy actions in this space until very, very recently. On the other side of that we've seen various risks actually crystallising. The 2020 Dash for Cash episode, the events in the UK this time last year around LDI funds. So it's retrospectively I think it's really hard to argue that macroprudential policies have been adequate in this space. And I doubt any of you would disagree with that conclusion. So let me ask the question then. So if you buy where I've got to so far, why do we think macro proof has been so timid over this period? And I think there are kind of three hypotheses, but you can tell me if you think I'm missing them or you have other ideas. So the first hypothesis I think is that these authorities just haven't seen a need to act more aggressively. And or they just didn't spot the risks building. Right. The second hypothesis is, well, these authorities did see risks building. But from a cost benefit analysis perspective, the actions they would have had to take were viewed as too costly. So it could be a rational decision to, you know, an understanding that risks were building. Then the third one is more about incentives. And it's that the elected officials that have designed these regimes have deliberately made them a little bit toothless and not set up to take strong policy actions. I think there's an element of truth in all three of these, but I'll kind of go through my arguments in a second. So let's start with the didn't see a need to act more aggressively. I think it's the case. This is my sense that macro potential authorities in many countries have made either explicit or implicit judgments that levels of bank capital and levels of household debt were broadly in the right place. They were comfortable with a degree of leverage in the system, so they didn't need to act more aggressively. Now, time will tell whether that's the right judgment or not, but I think that is probably where they've ended up. I don't think we can make this same argument for risks in shadow banking. So the next charts will explain why I think that. So what I've done here, I'll focus on the charts on the left to start with. I took the FSB's holistic review of the Dash for Cash episode, and you can do like a text analysis of that document and see which terms define that document, which are the most frequently occurring terms in that document. And you obviously get things like money market funds and basis risk and things like that. And then I've just gone back through the Bank of England's FSRs and said how frequently were these terms appearing before the fact, ex ante. And what you guess is a, there's a pointer on this, but you get a, yeah, a kind of a ramping up over time in the focus that was the attention that was paid to risks in market based finance. Right, so it's not the case that we didn't spot these and I don't think that conclusion is at all controversial. I've also done the same thing for the LDI episode that happened in the UK this time last year. So this, you might remember it as the Liz Trust's mini-budget. If I could put it in those terms, it probably rings a bell for you all. And there, what we see is again, I'd say some kind of increasing focus through time in risks relating to guilt market liquidity. The scale is very different. I don't think this was like a flashing red light for the FPC. But it was, you know, you see an increase in those terms. But what you don't see is any real discussion about LDI funds themselves and liability driven investments. So that's the amber coloured bars here. And you can see apart from a tiny little box that appeared in the 2018 FSR, there was nothing at all. So we partly spotted these issues. But if we're being honest, we didn't spot the actual thing that went wrong. And then obviously there's a lot of discussion after the fact. But what I want you to take from this is there was a lot of attention pre 2020 to the risks building in this sector, but nothing was done. So why was nothing done? So the second hypothesis is it's more the CBA, the cost benefits analysis of acting just wasn't favourable. I think there's probably some truth to this. So the argument would be these are international markets. If you take unilateral action in the UK, you're just going to see activity moving shifting abroad. So you'll lose some tax revenue or some GDP will be lost for no resilience gain. And it could be therefore a lot of authorities around the world were pinning their hopes on FSB level action. And I know that was the case because I was there at the time. I don't think it's quite fully true at the same time because if you go back through the record of the UK FBC, there just isn't a discussion that we thought about acting unilaterally. I decided not to because we were worried the risks would spread. This is a point Paul Tucker has made. So it's not my point. So I think there's an element of truth to this, but it doesn't explain the whole thing. So let's come to the last point, which is we've sat up these committees in a way to make them a little bit toothless. They're not really there to make tangible actions that affect resilience in a significant way. I think there's some truth to this. So most institutional frameworks out there don't have direct powers, although in parentheses that isn't true in the UK case. They can have any powers they ask for essentially. Livio mentioned this, but I think there's a whole load of reasons why we have a bias towards inaction. The IMF called this out over a decade ago, and I think they were exactly correct. Mandates are fuzzy. We have consensus decision making as a rule. We have remits that seem to expand year by year. All of these things, I think, have the effect of disincentivising clear actions. And then I'm going to ask a provocative question in the third bullet, which is, has there been an excessive desire to coordinate with other aspects of policy? Have macro-predential policy makers been too unwilling to ask awkward questions to ruffle feathers, these types of issues? My own view is that stress testing processes are symptomatic of this. So I think you can see some of these coordination problems in stress testing. I can expand on that in the Q&A if you like. I think I'm probably almost out of time, Libio, but you should tell me. So I'm going to finish with just... A good another five minutes, or... I'll have it. Yeah, I guess because of the minute discussion. I'm on my last slide anyway. Maybe I went more quickly than I anticipated. So I want to finish with, I guess, three thoughts for you for discussion in terms of things we might practically do and focus on. There's people in this room who care about these frameworks and online. To make the next 10 years more impactful and effective. So the first point I'd like to suggest is relating to stress testing, actually. And it's whether we can reorientate the macro-predential dimension to stress testing to make it more about identifying risks and vulnerabilities, finding out where the tipping points are in systems. So my own view of stress testing is we've got to a state where, again, I'll put it in a stark way because it's clearer that way. A lot of it is about reaffirming preordained positions that the banking system is resilient to catastrophic scenario acts. That's my view. I don't think we're learning a great deal from those statements. I'd rather see a process that had more plurality to it in terms of the stress scenarios, understanding what level of stress would cause a problem for the banking system. What types of risk is the system most vulnerable to? Because we know it's not resilient to all of these things. We've found with sharp but modest rises in interest rates that have caused big problems for lots of banks. So that would be the first suggestion to some people call this reverse stress testing, but it's kind of moving away from the current process, which is about, yes, the banking system is resilient. Thank God we found that again this year towards asking the questions of what would cause it to tip over. There's a very nice, some of you might remember from the post GFC era by Marcus Brunamire and I think Arvin Krishnamurthy as well, and it's called risk topography. I see Suja in the room who might remember this paper, but the suggestion was basically that we move towards almost a database approach of stress testing where we say, here's a bunch of n shocks of different scenarios in terms of yield curve shifts, basis risk and everything else. We'll feed them to the banks, you tell us what the impact on your capital would be, and we over time build a spectrum of responses in terms of which risks might create tipping points rather than this focus on a single risk scenario. That's the first idea. So the second one, I don't know if this is controversial or not, but it's, I wonder whether one lesson is that maybe operating these tools in a truly structural way is just too difficult. And we've tried with the CCYB, but I wonder whether we should be thinking about building more structural rules based elements into the regime. I think that's probably where I am actually. And the last point is whether there are things we can do that would incentivise greater action. And I'll, I think these are obvious points, but I think there should be voting on macro potential issues if you're an external member of a policy committee. How can you possibly influence the debates if your votes isn't individually registered? I think there should be work to kind of unpack some of the expansion and remits that we've seen over the last decade towards narrowing down the focus towards systemic risk issues. If you go and look at the FPC's remit, for instance, you'll find all things about international competition, competitiveness. It's all in the secondary objective, but these things affect the focus of the committee, I would say. And then lastly, this is more a research point, because I guess this is a research conference after all. So I'll end with something on that area, which is whether, you know, should we be doing more research to clarify the objectives of macro pru? Livio, I did mention GDP at risk at the very end there. I wouldn't say that's the only focus at all. I'd like to see a much bigger effort to try and understand the properties of different metrics. Your bank equity at risk is an interesting idea too. Stop there. Thank you. So thank you, David. Very fascinating. So I think we gave the floor to discuss it and then we have a perhaps a few minutes for questions and discussions. So are you online? Thank you. Okay, super. You can go ahead. All right. Great. Thank you. Thank you, Livio, for inviting me to discuss this very interesting paper by David. It's Oscar Quincy. I am from the Federal Reserve Bank of New York. So the usual disclaimer applies here. So what is the paper about? As we all know after the global financial crisis, many countries have implemented macro prudential policies. And David is asking how well this new framework is functioning. And as we all heard now, he's a bit critical on the effectiveness of these macro prudential tools on the bank side. It's not clear whether discretionary, cyclical, macro pru have significantly affected the resilience of banks. He also showed us some compelling evidence on the household side. We have seen that service to that income and that income ratios have fallen for most advanced countries over the past decade. But it's not clear if this deleveraging is the result of macro pru. So I agree with, so it's a very compelling evidence and I agree with basically everything David said. So what I'm going to do today for my presentation is I'll think about some of the questions that David put forward at the end of his presentation. And it is basically asked how the framework needs to evolve going forward. Do we need to think balance between cyclical and structural policies? Can we revise the framework to clarify objectives such as GDP at risk? And he also mentioned that whether we can reorient the macro pru to stress testing to make it more identifying the underlying vulnerabilities. So in my presentation, what I will do is I'm going to rely on my recent research. It's called financial instability real interest rates joined with my colleagues from the Fed and also John Luca Benino. And I'm going to use this concept to try to address some of those questions. So what we do in this paper is to come up with a summer statistics and for financial stability. And we call it our double star. And it is very much like our star used for macro conditions. If the prevailing interest rate in the economy is greater than our double star. And we call that then the economy is faced with financial distress episode. But for me to try to explain you what our double star, I guess I need to step back and define what I mean by financial distress. Just to formalize the idea, I'll very briefly tell you a very simple model of banking stress. So we have this like simple model with the banks at the core. We could call them financial intermediaries, but for like simply it is banks. And they are going to be investing in risky and the safe assets. Right. And they are and the risk assets have a price of the queue, which is the asset price. And they are going to be collecting the causes and they also have their equity value. And the network is going to evolve. The equity of the banking sector is going to evolve as shown in the second equation. They are going to be collecting return on safe and risky assets, but they also pay dividends to the household. What is critical for us to think about the constraint and here the financial, whether the economy is in the financial stress episode or not is determined by this occasionally binding leverage constraint. So the total leverage of the banking system has to be less than or equal to the maximum leverage allowed. But what is critical here is that in the banking system, banks could be investing in safe assets and also in the risky asset. And the composition between safe and risky asset or the so-called reach for yield determines the risk taking capacity or the leverage constraint of the banking system. So in this world, when the leverage constraint is not binding, we are in a stable regime. And if the financial constraint is binding, in the second case, we have the financial instability regime. And in that world, we have that non-linear financial crisis dynamic are kicking in so that we have like what spreads have been very large on volatile. And by definition, the financial stability interest rate is a threshold rate of interest rate at which this leverage constraint becomes just binding. The mechanism is true, the asset prices. If the interest rate change, asset prices move and then this moves the leverage in a way that we find a fixed point at which this leverage constraint is equal to the maximum leverage. Why I think this type of concept financial stability interest rate useful for the design of macro potential policy because like financial stability, this concept is dynamic. What do I mean by that? So when, for example, if the economy has a shock, right? So if the economy, the monetary policy is kept low for a persistently, for a long period of time, what matters for financial stability is not in the initial impact, I guess, but it is the dynamic effect. What happens after a few years? And in this example, I'm showing the dynamics of financial stability rate in response to low interest rate. The upper panel here shows the real interest rate. The middle on the up is the credit expansion in the economy. And the last panel on the upper side is the financial stability gap. On the lower panel, I show bankers network, share of safe assets, and finally I show maximum leverage. When interest rate decrease and stay low for an extended period of time, it is good for the economy in the short run, right? Because it is going to be a booming asset pricing. So the credit is going to expect and we see initially financial risk are released. However, what is important is the evolution over the next few years, over the next three in our models relation is going to be over the next three years. Spaced with low interest rate, the banking system might be taking more risk because now they are going to be reaching for yield, right? And as shown here, the share of your safe asset in the balance sheet is going to be diminishing over time. After three years, we see that it is like my small, the implication of is that then the risk taking capacity or the leverage ratio, or how far they are from the leverage ratio is going to be increasing. So they are going to be much closer to the leverage ratio and this in turn implies that the financial stability gap narrows down significantly. So the persistently low rate today cause vulnerabilities to build up and that is going to reduce to monetary space for financial stability. How it is related to GDP and risk and why that argument might be valid for in this concept because what I show you was the financial variables. If you look at the evolution of the distribution of GDP and credit spread in response to same shock, low interest rate shock, what we see as before, not like I'm showing here the median and also the whole distribution of GDP. In the beginning, it is good for the economy, but over time there is more and more risk especially after three years. We see that after persistent low rate, vulnerability is built up and economy GDP becomes more susceptible to negative shocks. And as you see, the lower tail of the distribution is more affected. Why it is important because as these vulnerabilities build up and what happened now, for example, persistence like now an unexpected increase in interest rate. If that increase in interest rate hit in a period in which the financial economy is in a vulnerable period, as I show here in the red line. If the shock and interest rate increases by one percentage point, which is not a large increase, yet if that happens in a period in which the economy is highly vulnerable because of the underlying financial conditions, then we might see that the interest rate financial stability rate gap difference between the R star and R double star can turn into negative. With dire consequences for the economic activity and the spread. Monitoring this type of index or monitoring financial stability or R star, relative R double star over time and keeping track, it might give us a hint that whenever R double star gets closer to R star, it suggests that trade those might be minute between the financial stability and macro prudential stability. And in this context, we could see that like we can show as like as I show in the figure here, macro prudential tools, especially rule based capital requirements. It is the way we define is that that whenever the banking sector equity position fall below a certain threshold, then bankers are forced to issue more equity at a constant rate and also this rate is time varying. So it could potentially eliminate this trade off and reduce the downside risk to GDP and the credit spreads like as shown here in a world with macro prudential, we have that the fact tail of the right like this right tail of the distribution is greatly reduced in a world with macro prudential policy. So just to summarize, we, my thoughts on those discussion topics are the less financial stable economy is more vulnerable to bad shocks, but it is responsible with shocks is not different than before. So it is worth really to try to clarify the objectives of the macro prudential tools of policies suggest GDP at risk. And in the face of bad shocks, even though shocks are small, a trade off between the so called our star and our double star may arise. And as we shown in this case rule based macro prudential tools such as capital requirements are desirable to avoid this trade off. What my metric was in the paper what my metric was the welfare and I've shown that both structural and the technical tools are welfare improving. However, we cannot to push these tools too far away because one needs to balance between preventing tail risk versus reduce credit for non financial corporations today. Finally, like this is a dynamic concept as I said, and monitoring this type of statistics summary statistic can help identify underlying vulnerabilities and the idea again is just to summarize that it is very similar to stress test. Here we measure how large a surprise increase in the rate the economy can bear before tilting into a crisis. And this concept can definitely be implemented in the context of a more like more complicated model with several underlying vulnerabilities present. Thank you very much for your attention. Thank you. Now this is very interesting and we all starts using the R double star, you know, like we use the R star. So it's going to be maybe slightly confusing. So the we have time for good time for for a few questions. So I would say if you agree, I collect a few and then you would respond collected to them. So okay, so one over there. Let's start there. Thank you. Alistair on from Bank America to David's point. It's hard to see the impact of macro potential policies on bank capital. Fair enough because for other reasons bank capital was doubling or tripling depending. But it's very clear the move of credit from the banking system to the non banking system. So when you're thinking about future projects, what's the way you put on stress testing for banks? And what's the imperative to address macro potential racing in non banks, which have been substantially all of the increasing credit for the last 15 years in most European countries. Thank you. Okay, then there was one there and then Sujit. Thanks a lot. Thanks a lot for both the presentation and discussion super, super insightful. I also like that, you know, that people from outside challenge, you know, the regular, the regular vision of macro potential policy, but I wanted also, you know, to put a bit response. Like more probably central banker response that is what about heterogeneity in a sense. For example, for border based measure, the idea is also that we don't want to necessarily tackle credit growth. And so this is actually a cost of the economy. So we somehow interpret it sometimes as a cost for the economy. And instead, what we want to try to do is to tackle the detail of the distribution that is more vulnerable. So from that perspective, you could say that macro potential policy can be effective on details, avoiding that this fraction of people go default. So I was wondering whether you can take this also into account in assessing the effectiveness of macro. Thank you. Then we move counterclockwise. So did you add one and then there were a couple there and I saw them. Thanks very much. So did you party from the ECB and thanks David for that really nice talk in terms of the lack of action that's had impact. And especially I'm thinking also in the non bank space to what extent then you sort of touched on it, but political constraints and lobbying pressure. What role do you see that as having played? You mentioned the UK's FPC can secretary competitive is subjective, but we know that in continental Europe in the US, you know, everybody's trying to promote their financial sector. We know that there's strong lobbying, say from the asset management sector. And the essentially a lack of action has been reflective of the political environment and political constraints that are implicitly or explicitly being internalized in the way in which macro potential authorities have acted, or in fact not acted because they're concerned about those political constraints. Thanks. Okay, so we move this side then. Stefan. Yes. Thank you to both Stefan far from the ECB. So, so you the proposal at the end is that you may was about stress testing, no reviewing such as looking at the risk topography and where is it that the system would break. So to say. Now a bit the difficulty that I see kind of in this manifold is having structure and flexibility and how to manage it. So on the one hand, we would like to go doing that know on a structured manner. We've got like even 10 risks and we kind of send it to the banks and then please answer and then it comes back. And it would give us for those 10 know which ones is the closest to to the breaking point. Now there's risk is also about kind of identifying new areas and new kind of maybe you have thought about that and how to balance it to going forward. Thanks. Thank you so much. Was another one there. Thank you. Christof Boston University of Zurich. Thanks for the interesting presentation discussion regarding stress tests. I'm wondering whether you're not concerned that stress test would capture one scenario and entirely miss another one. So I'm wondering whether it wouldn't be more robust to tie the CCYB to sufficient sufficient statistic like just the policy interest rate. Not perfect either, but it might capture more relevant scenarios. Maybe. Thank you. Any remaining questions before we give the floor back to David. I mean, I also had a bit of a spin to what the students said in terms of political economy. So one story that I've heard in Asia is that, you know, one constraint that Michael Drew is also, you know, real estate prices, you know, because, you know, think of Hong Kong. You know, the real estate prices are, you know, incredibly high. But but the tortoise cannot touch it because it's also it's also wealth for for citizens. So any macro national measure that he uses, the real house prices is, you know, is going to be, you know, political and feasible, which also keeps the prices also at this very, very high level. So yeah, so there's a bad equilibrium. I don't know how you want me. You have got a lot of feedback and, you know, take your time. But yeah, I mean, it's okay. And then we need to move to the final. You give me a kick if I'm taking more than five minutes. I might start with the Livio Suja points excellent point about political economy. You're of course right. That's quite a damning criticism of these. I would say that's an even more damning criticism, the one I gave you. So, you know, I, I thought what we were trying to do with these regimes is kind of make them sufficiently independence outside of the political process with independence on them. To allow them to kind of raise difficult issues and be a layer above those. Certainly those lobbying issues, which in fact all these debates. So I don't doubt that huge lobbying has happened from the asset management industry. Certainly, we all know that. But if that's actually led to an unwillingness to call out the risks and to do something about it, that's that's quite a serious critique. I think you may well be right. But real estate is certainly correct in a number of countries, but the same point should apply, right? If these, if these bodies are really worth their salt, you know, it has to be to ask questions and to call out issues that are threats to stability. Otherwise, literally, what's the point I would say? So, yeah, I'd like to think more about that, but that's my immediate response. Alistair, you raised a very good point. Yeah, you're totally right. There's a nice charts in the speech by Andrew Hauser from last week, which I think illustrates the point you're making, that at least in the UK context, and I bet this is true in in Europe as well, that all the kind of credit growth we've seen on a net basis has been in the long bank sector. And that's undoubtedly a reflection of lots of things, but Basel III would be one of the things that certainly caused that. I don't disagree. Suja and I actually wrote a paper many years ago, but it's actually just been published in the Bank Underground series, which tried to kind of present a little model of the CCYB and say, how would you adjust this instrument if you, what would optimal policy be different if you had a market based finance sector that was growing? And our conclusion was, well, you kind of use this tool less because it's less effective because every time you use it, you're pushing stuff into the non bank sector. Somebody asked me about that the other day. I think it is right, but we know banks are also critical to stability, liquidity provision is crucial. So I don't want to underplay how important it is to get bank resilience rights. So I would kind of mitigate a little or water down the conclusions from our paper, I think a little bit in that regard. But your point was really, where should the focus be in terms of fixing issues? And I think you're exactly right that it should be in the non bank space. That's the area where we don't have microprudential standards. So it's the obvious thing that macroprue should have been set up to do. Your point was a very good one. Yeah. I don't have a great deal to say about that because the data are not so available. Your point was about, you know, is this about cutting off the tail of risky borrowers? Maybe one point I will make is it's not obvious to me where you look in the tail. If your objective is macroprudential policy that should, if you think GDP at risk is at all related to what you've been set up to do, we're looking not to kind of make every individual borrower resilient in the economy, but we're worried about threats to GDP stability. I think that suggests it can't just be the far tail of the most highly indebted borrowers in the economy. There's a chart that the UK FPC show in every FSR, which is the number of borrowers that have DSRs. I forget the number but it's really far in the tail and it's like 1% of households are in that position. I kind of feel like that's not the right place to look as well because that is not a threat to GDP in the UK. I would argue it's a big deal for those individual households. So I think I agree with your point but I don't know exactly where you should be looking and I think it's not at that degree of tail-ness. Stefan, I've written down all the questions but your questions are very good. I mean we don't have to decide between one approach and another, right? Your point was around stress testing and how much flexibility and structure there should be. I kind of feel like all the emphasis on single scenarios is a massive mistake and it's leaving us blind to kind of where the risks are. So I would like to see a move towards something that's, you mentioned this 10 thing. There's another nice paper 10x10x10 that explores a similar idea and I think these are things that we should be trying to move in that direction for my money. But that shouldn't kind of offset the or shut down the idea that occasionally we say well this is a big risk. We're going to add it to the things we want to find out about you guys. Chris Stoff I think you asked a question. I do agree that we shouldn't tie the CCYB to stress testing because it's a backward looking concept that currently isn't telling us very much about the level of risk. I would not agree that tying it to the interest rates will be a good idea because I think these cycles operate on different leads and lags so I wouldn't like that either. I'm not telling you what I would like there. Thank you. Also any last word from the other side of the Atlantic? Do you have any last comment? I just thank Osgo as well. I forgot to do that in the beginning. Osgo, I'd just like to thank you as well. Sorry I should have started by doing that. So thanks for your insightful comments. Can I just make one point on our double star which is I think that it's a great concept and it's been very influential obviously in the last year and a bit given the interest rate risk has been the main issue. It feels to me from the model you presented that it's actually leveraged that we should be looking at rather than the interest rates. That's the more direct measure of where the risk is. So that would be my only question for you in terms of should it not be a leverage measure that's the key metric for financial stability rather than trying to map that into an interest rate? Let's not start a long discussion on this. Just very briefly. This is just a summary statistics. It's not only leverage. That is what we argue. It is other financial variables like the risk ratio or how safe asset to risk or the risk taking capacity of the banker and all other financial variables is just summarized in one measure which is the R double star. In this framework it's again not only how leverage moves, but how it moves relative to the capacity, which is very hard to measure. And we are here providing a framework to summarize it in terms and convert it into an interest rate space. One could definitely follow like several financial variables, breadth, leverage, but again, this is our argument is that it's a summary statistics and it is in that sense it's useful also to be able to compare it with the prevailing interest rate in the economy. As you know, it's super complex, hard to come up with this measure. You would agree that any kind of market potential policy rule would have something like capital requirement as a function of R double star. So R double star would be on the right side and some measure of capital or leverage would be on the left side. So the way I think about it, these are variables that you follow like you observe or you don't observe but you can recover and then comparing or seeing how they evolve will give you an idea how or when these type of macro potential policies could be activated. Because the objective is to try to avoid the trade off and we just telling you under which conditions that trade off may arise. And I have shown you that with the use of macro potential policies, one can release or like eliminate right or remove the conditions under which you will get into a trade off position. So you will keep using monetary policy for price stability and then macro potential policy if it was activated enough to have the financial system or resilient would not bring you to that vulnerable state where the financial stability rate being binding. So that is, I think, still I would do the usual macro proof and the R double star and other variables I would follow and compare the dynamics of it. It is not really the static concept I'm telling you. It's really the whole dynamic of how R star and R double star evolve relevant for the design of macro proof. So it's not as simple. Thanks a lot. Thanks for a great session.