 Okay, so I guess we are ready to get started. Good afternoon, ladies and gentlemen. The question today is, is another global financial crisis inevitable? Are we on the verge of another meltdown, the seeds of which may have been sown in our response to the last crisis? Are we really as safe, are we safer, are we more robust, are we more resilient? As a financial system, more so than before, or are we brittle? Are we standing on a fault line that could give way any time now? That is the question. My name is Lutfe Siddiqi and I will be moderating what I hope will be a lively debate on this question this afternoon. We have a very distinguished panel here with us and I will introduce them shortly. But no less distinguished is also the audience that we have sat around the arena. And I would like us to help set the scene, get a baseline of what your starting positions are coming into this debate. I am told that voting is easy. You can do that on your smart phones. That's the URL, wef.ch at finance. And that's the question. Is another global financial crisis inevitable? If you could please start voting now and let's get the baseline going. Okay. Henry, should we get the results up on the screen, please? 65%, 68%. How many people voted the last second? 71? 68%. This is a living organism. Good. Can we stop now? Okay. So more than two thirds, 69% say yes. Another global financial crisis is inevitable. And just under a third are starting off saying no. And we will see what the before and after is to see if the position changes at the end of this session. Let me come back to the panel. And while I introduce the panel, let's loosen up. Could I get a round of applause for the panelists as I introduce them, please? Professor Liu Mingkang is a distinguished fellow at the Fung Institute in Hong Kong. Professor Liu has done many, many different things in the past, but amongst those Deputy Governor of the People's Bank of China internationally, he has been with the Financial Stability Board and also the Banking Supervision Committee in Basel. I'll go with you. Rob Whitfield is Chief Executive Officer of Westpac Institutions and next up is Helen Liu. Helen is Head of Equities for China at Blackrock. And Paul shared, just arrived from New York, is the Chief Economist and Head of Economic Research at Standard & Poor's. Okay. So let's start. If I could ask Professor Liu if you could give us your opening comments on the question that we're debating. Yeah, I would be very brief. And my answer is yes. The reason why I say yes, because realistically speaking, we are still facing three great uncertainties. The first one is the International Monetary System and its uncertainties. We know that we have still embedded the shortcomings and we haven't got to the better solutions and options. A lot of countries are still in dollar trap and secondly, the uncertainties are hugely involved in line with the innovation. And certainly, what happened is the reverse of the QE in the US, the Tehran office can't speak its end, it's already approaching to the end. But the reverse operation of the QE in the US and possible US rate hike will cause huge capital flows out of the newly emerging markets and the European countries as well. So with all these uncertainties, I should say it's still highly likely we will be facing global financial crisis, maybe with different degrees, different size, different intervals of timing. And please remember, people are always having short memories in the markets and recorders and governments are always behind the curve. So that's my concern and that's my yes to the question. Thank you. Thank you, Professor Liu. Robert Field, that's at least a three-barreled gun that Professor Liu has fired at you. Systems issue, disruption technology and the reversal of QE. Do you agree with him? I certainly don't agree with Professor Liu though. I think those insights and observations, there are some commonalities in the way I see this playing out as well, but I think the area where I disagree more and why I support the no case, that it's not inevitable that we end up with another financial crisis is that the conclusion one makes from those first three points, I don't believe, ends up in a GFC of the type that we've just experienced in the regulated system. So we look at a couple of the reasons. We know that the last global financial crisis started within the banking system and clearly we understand the banks were significantly the cause. But perhaps it's equally interesting to understand why was it such a magnified effect? Why did it become so significant? How did the system fail us? What led us down? And perhaps I could draw a couple of observations, maybe three for the three barrels. The first would be in terms of the regulators. I think they were certainly in governments. They were slow to understand the severity of what was unfolding before their very eyes. The second point, even when they started to understand what was before their eyes, they were slow in terms of their response. The timeliness was not there and it wasn't proactive. The third perspective I would share is that even when it did come and actions were introduced to markets, it wasn't of the right magnitude to deal with the severity of the crisis. So back to the first under-recognition point. With that by way of background, what have we done in these long six years since to rectify that? And I would say within the regulated system we've actually done quite a lot. Now it's easy for people to say you're a banker, of course you would think that. But let's just go through a couple of those. The first is central banks have much larger balance sheets today than they had. They have both the capability but also the determination to act to use those balance sheets and act in a pre-emptive way when they see things unfolding not as they wish. The second, and this was a real differentiator for some economies that did better than others during the GFC, supervision and the intensity of supervision has absolutely increased. The third is regulators are far more coordinated. And this goes to the point if it's truly a global financial crisis, having a coordinated response puts you in a far stronger position. The fourth point I'd make is that we have looked well beyond the regulations. We've done a lot in terms of capital strengthening and liquidity strengthening and all of the new rules and we understand that. But it's also gone deeper. It's gone into culture and more importantly it's gone into conduct. And the expectations and the behavioral requirements of bankers today are far clearer. And the penalties as we know from all those multi-billion dollar fines are far more severe. And that has certainly bought the attention of both management and boards. And lastly I would say the system is much more transparent. So there's a lot more work done on stress testing, scenario analysis, recovery planning, all of which has transparency and makes the system much more robust. So I would contend that the shock absorbers that have been put in place over this last six years has really made us much more robust system and much more able to withstand a financial shock. That may not come though without some unintended consequences. And perhaps we can pick this up a little later. This wall of liquidity that has been driven to really respond to the GFC perhaps might end us in a very significant asset price correction picking up on the professor's comments. I certainly believe you could see an environment that looks and feels a lot like 1994. We're seeing at the moment this liquidity chasing yield all around the world. We're seeing junk bonds trading at their tightest margins. We're seeing people talk about asset bubbles in property markets in various parts around the world. Equity markets at around all-time highs in the US. That liquidity is driving asset price inflation. I think when that music stops, as the professor says, when they withdraw the quantitative easing and then when they reverse it, that is certainly going to end up with quite a meaningful market response. I just contend, though, that will be a price response rather than a freezing of liquidity. Therefore, no GFC mark, too. Right. So it sounds like you would concede a correction, but definitely not a crisis. Absolutely. OK. So Professor Lee, I'll come back to you shortly. But he said it's more transparent than opaque, dampening effect rather than magnifying effect, and we've gone beyond regulation. So we're more than ready. Helen, over to you. Thank you. Look, I think Professor Liu and Rob both made some very, very insightful comments, and I would agree with many of them. I think for me personally, I would probably come in somewhere in between these two views. But I do think that there are some substantial concerns when we think about what's changed now versus pre-GFC. So the way I look at it is, you know, if we could form a two-by-two matrix of sorts, we have DM and EM, roughly, and then we have developed markets and emerging markets. Then we can look at what's improved versus back then, and what may have posed greater threats versus before. So simply put, if you look in the DM column, you know, there are some very obvious improvements that have been made, some of which were mentioned by Rob just now. You know, the banking system is an obvious one and all the regulation that came with it. I think the property market, most people in this audience would also agree, a lot of the risk there in DM property has been deflated over time. There have been some new areas of risk that have cropped up. For example, high yield, low grade credit in US and Europe, a lot more issuances, lower quality. I think that Paul can certainly comment on that later on as he's the expert in this area. But overall speaking, I would say that, you know, the likelihood of a systemic financial crisis in the DM should be lower today versus before the GFC. Now if we move on to the EM column, I think things may have been moving in a different direction. Certainly a lot of things have been improving over this period of time as well. As an example, many banking regulators in the EMS, for example, thanks to the valiant efforts of Professor Liu present here today, have recapitalized many of the bank's balance sheets and made them more resilient versus before. However, I think there are three rising concerns in terms of where EM is today versus before. I think the first one is property prices and asset prices, as some of the other commentators have touched upon. So that's across many different geographies in EM. For example, in Asia or closer to home here in China, in many of these markets, property prices have close to double versus 2007 levels. If you look at China, for example, the amount of square footage started or sold in 2013 is close to two times out of 2007. Now I do very much believe that there is plenty of unmet demand. I do think that housing penetration will continue to rise meaningfully over time, but have we passed the inflection point on that S-curve in terms of changes, I do think that probably last year was kind of the middle point and going forward on a yearly basis, we may have a deceleration of growth rate in terms of flow or maybe even eventually negative growth rate on a yearly addition basis. So that poses some risk to the system. The second one would be really the non-bank financing. So obviously as part of the structural deepening of the financial systems, we're very much moving in the right direction, diversification of financing sources, but regulation still needs to catch up and address some of the risks that have arisen. I think that's something that could be a bigger threat versus the pre-GSE era. And then the third point is very much similar to what Professor Liu and Rob have already mentioned, which is this foreign investment and capital flows issue that's very significant. The ISF, IMF has called this a systemic liquidity mismatch issue, meaning that if and when potential foreign capital decides to flow out of emerging markets because of the worsening current account balances versus before, we could have a situation where the liquidity far outweighs the ability for the domestic market makers to actually intermediate them. Helen, this bifurcation between developed markets and emerging markets, how real is that? I mean, it's all the same now, isn't it? We're all connected. It's certainly much more connected than before and that's part of the reason why I still have some concerns. I do think that right now, obviously, the DM space is much bigger in terms of weight and importance in the global economy and in the plant financial space. But clearly, the importance of EM is rising. The interconnectivity and the linkages are rising. If you look at China specifically, for example, there wasn't much of a CNH market some years ago. There wasn't as much reliance on offshore financing and so on. Thank you. Paul, so we heard a new phrase, systemic liquidity mismatch right now. I read somewhere that if you take the last five years or so, the sum total of all the major banks, the inventory of fixed income that they hold, is down by 50%. The sum total of fixed income assets under management held by asset managers is up by four times. That would suggest that there is that mismatch and on the way out, if there's a price correction, that exit door could narrow very quickly. What do you say to Helen? Well, let me just lay out my thinking about this question, this key question, is a global financial crisis inevitable? And I think there are two key words there, global and inevitable. Certainly, we're going to see more financial crises in the world. But global and inevitable, at least on a timeframe of, say, five to 10 years, I think it's very unlikely. So it's certainly comfortable arguing the negative case there. And let me just make three points about that, which will overlap, not surprisingly, with Rob, given that we're on the same side here. And the first point, rather obvious point that I'd make, is that truly global financial crises, thankfully enough, are very rare events. We basically had two in the last century. Of course, the Great Wall Street Crash and the Great Depression, and then the Great Financial Crisis of 2007 to 2009, let's call it. So they're rare events. And financial crises, so just from a sort of statistical point of view, it would sort of be rather unlikely to have another one anytime soon. But the key point there to make is also that financial crises, again, of a global scale that we saw in 2008, have to happen for a reason. There's typically asset price bubble develops, which is fueled by credit buildup. Asset price, the bubble then deflates. On the other side of the balance sheet, of course, that credit buildup of debt is in the system, and suddenly you get pressures for a run on the banking system. And then if there are sufficient vulnerabilities, as we had with structured products being distributed all around the world, remember the word toxic assets, and then you had contagion, which went through the world, and financial systems basically froze up. So there has to be an underlying cause that comes to the surface. So my first point would be to say those vulnerabilities were there in the run-up to 2008, we now know, but to a large extent they've been released from the system. And I don't think they've been replaced by anything of a global nature yet. The second point that I'd make, again, echoing Rob's point, is that there's been a really big shift pre and post the crisis in terms of regulators and policy makers and the vigilance and the mindset that they have around financial crises. We sort of tend to forget this now, but if you go back to the pre-2008 period, essentially regulators had a philosophy largely of kind of market fundamentalism. If you remember the Greenspan doctrine, for example, that central banks couldn't identify asset price bubbles even if they could, they shouldn't really do anything about it. And there was this general sense that markets were largely self-regulating and self-correcting entities. And so regulators basically had checked out. Now, that's changed an awful lot. There's been a tremendous regulatory response. You now have legislation and new frameworks in place. Dodd-Frank in the US, you have the Volcker rule, you have in the UK, for example, now at the Bank of England, the Bank of England took back the financial supervisory responsibilities that it lost when Gordon Brown came in as the treasurer back in the mid-90s and added to the monetary policy committee at the Bank of England now is a financial policy committee that runs in parallel. And all it does is sniffs around and sees if there's a financial crisis. In the United States, you have a thing called FSOC, the Financial Stability Oversight Council, which is the Fed and the Treasury, and other regulators that are on the case sniffing out whether there are emerging financial crises. So that part of the situation is very, very different. That's sort of like an ex ante thing. Regulators are really vigilant. And I would also add that in the markets, there is more vigilance as well. I think Rob could probably testify to this. I can testify from a reading agency point of view the compliance and risk function within reading agencies, within banks, within asset managers, I'm sure BlackRock as well. Everybody is much... That function has much more teeth and people are much more vigilant. So that helps to head off crises. And the third point, the final point I'd make is, well, what happens if something did actually happen? A crisis started to gestate. The policy makers now, the regulators, the central banks and the financial authorities have much better tools. They've learned a lot about how you would deal with large-scale financial failures to prevent contagion and financial system. So for example, in the US, again, part of Dodd-Frank was so-called Title II to essentially introduce an orderly liquidation authority. The FDIC, the Federal Deposit Insurance Corporation now, will be sort of taking over those functions. And similar mechanisms, we now have a banking union, for example, not quite in place yet, but moving towards a banking union in the Eurozone. The ECB emerging as a single supervisor and also now a resolution mechanism being put in place. So the key event that happened back in 2008 that really triggered the global financial crisis was, of course, the Lehman bankruptcy. Lehman went into Chapter 11 bankruptcy. That would not happen anymore. That was a very disruptive event. There are now tools in place that regulators would use and deploy after the event in order to prevent that kind of contagion. So when you sum it all up, it looks like there's less underlying reason for there to be a financial crisis and policymakers, both ex-ante and ex-post, are much better prepared to deal with one. Thank you, Paul. I will ask all of the panelists, if they wish to, to take it up to give us a brief rejoinder to what they've heard from the other side. Professor Leo, I'd like to come to you first. You have the crowd on your side or you have the crowd on your side, at least at the start. But we've heard a very long laundry list of things that measures taken, lessons learned from both these two gentlemen. What's your response to that? Yeah. I really acknowledge the improvement as progress worldwide, especially with the efforts of the G20 leaders. It's a political consensus to move on and drive us into the calm water. That's the political consensus, it's over there. And the FSB and the BCBS, IMF, the work bank, hand in hand, they're working together much better and share the information, even share the human resources. So I really acknowledge the progress because I'm vivid proof about whole the history, how we move on. But the key point is that when we, Rob mentioned when we move beyond the boundary, traditional boundary, and get focused on the new fresh arena, like cultural things and that behavioral, their stories and so forth, that immediate I will be thinking about how difficult it would be to get things fixed in that areas because in general I couldn't see any difference. Today, the stories happened in year 2007. In the market still, you can witness here and there, war generals are still ahead of ordnance generals, okay? And the second, the recorders and the financial entities still can't control how far ahead is innovation from their infrastructure. And thirdly, a huge lesson we draw from the last global financial crisis is that products sold in the market should be understood and transparent enough. But if you look at the markets elsewhere today, still you could find out the products sold in the market here and there are embedded with options, leverages and so on so forth. Army channels, participants are still over there to form shadow bankings, not to mention the new new things like mobile financials, the so-and-so force. So how to deal with all this and to change a culture is not the easy story. You got to nourish it by 100 years, but you can ruin that overnight. So this is something still, you know, disturb my mind. And so that's the, we should never say never again. And I agree with Helen for her many points, but only to look at the DM and the EM, I could hardly tell the difference today. The heavy interconnectedness in between. So in the future, it's not a global financial crisis, even a regional financial crisis, could spill over quite hugely and hurt us a lot. The stories mentioned by Rob in 1994, an auto-material reminder of this story happened in the U.S. year 2003 to year 2006, you know. If you look at the, you know, the fat rate, threat like this time, and you can see it's a 200 years low for the treasuries of the European markets, almost all countries in the DM markets, it all no matter, disturb your people's minds that what happened, what if a food or energy price hike, which is likely today, not to mention your political problems, and put all the central banks at QE, you know, trapped. Are they ready? No. And what if automation, everybody is so excited talking about automation, technology, innovation, information, era, and so on and so forth, but have people ready, got ready about such a trend, automation, definitely will destroy tens of millions of jobs globally. I see. And millions of jobs in new emerging markets. If you combined with what if I mentioned, so that would be a compounded negative impacts. And if nobody can lose the market like China, nobody can lose the market like India, new emerging markets. So anything happened for the new emerging markets will heavily negatively impact the DM markets as well. So that's what I should say, that not to mention the contagious is always, you know, contagious, we always continue and tear proven otherwise. So this is something I take it very, very seriously. 1994, trigger off the Mexican fiscal problem crisis. Right. Then in two years, Asian financial crisis. And year 2003 to year 2006, when US rate hikes more than 10 times, 25, 25 basis points, ignoring what happened with others, ignoring what happened about the American markets, that it trigger off the global financial crisis from the prime supply market of its own. Let me give the other side an opportunity to respond. Rob, we heard a lot of things over here. The culture change that you mentioned doesn't seem to have registered. I guess we talk about the system now having more experience dealing with issues in a coordinated manner. You mentioned G20, but the geopolitical background is such now that there isn't even a G8 anymore. So the goodwill in the system may not be there that was available even five years ago. How would you, what's your rejoinder? Thanks, Lutfi. Let me pick up on just two or three of Professor Lou's wise counsel, because I think there is some wise counsel there for all of us. The first point in terms of, it's very hard to judge how far innovation is ahead of infrastructure. I would completely agree with. I think Professor Lou is absolutely on the money there. However, as we all know, innovation is the source of future growth. And so we don't want to stifle future growth. And I do not see the correlation that that, just because we can't understand that gap between innovation and infrastructure supporting it, that that leads to a financial crisis. I think Professor Lou's comments around 1994 are exactly my point. If we think about what the Fed did, they did move very aggressively. 10-year yields went from 5.5% to over 8% in just 12 months. They moved more than 10 times the cash rate. Not only do we see the Mexican bank crisis, we also saw Orange County go bankrupt. It were very significant asset price corrections responding to a period of low inflation, low interest rates, ultra accommodative monetary policy for extended periods. Would you agree that if that movie were to play out again, the world is a lot less siloed now, would you agree the knock-on effects could be dramatically different? My perspective is, I think we can have the asset price correction, the monetary policy response, but without liquidity freezing up between bank players. And that's the big difference between an event of meaningful market size and the markets collapsing or freezing. And that's why I think you could have a very significant market response responding to exactly Professor Lou's concerns, but I don't believe that will actually freeze a system such that the banks do not transact with each other. Inside the regulated system, in my mind it's undoubtedly stronger. Thank you. Helen, would you like to come in here? Sure. Look, I think we're touching upon a lot of the common threads here. Effectively, I think it comes down to regulatory preemptive action and regulatory reactive moves. I think in this particular case, now that we are in a generation of better technology, more innovation, one of the things that has really improved is communication, transparency to some extent versus 1994. So I think when we do have certain things take place, potential triggers to systemic events or big threats, we are able to understand them and coordinate them better in advance. I think it comes down to political will and the ability to push through structural reforms ahead of the game. I do still think that we have plenty of time to address these types of issues. I don't think that the emerging market risks that I highlighted earlier are likely to play out or blow up in the near term at all. So I do think that policymakers have ample time to do something about it. And I think the important thing is that we've gotten better and better at expectation management and messaging. And that's very important in terms of avoiding a vicious feedback cycle and making sure that we reinforce the virtuous feedback cycle in many cases. So I think that's a positive and that may help us in terms of buying a lot more time for these issues to be fixed. Right. So you don't think that the moral hazard of quantitative easing has gone out of control. There is still time and room for supply side reforms to be affected? I think that there should be sufficient room for reforms to be implemented, but obviously there is always less and less room as time goes on. So the faster that these structural reforms can be implemented, certainly the better for the global system. The point of hers is correct. The destination is clear set. We are moving along with the direction. And as the time goes by, we can witness further progress in that direction. But the point is that if we are realistic enough in talking about the individual regulators and the solidities, central bankers and the regulators and supervisors, the willingness to share information and to the solidity they received to share the information with others are still very limited. Right. Okay. Okay. Many, many years ago, Mark Twins said, the banker is a guy who wants to loan your umbrella when the sun is shining. And once he had a bag of song that's going to rain. And today the regulators, they can share the information which is good. But when during the stress of time, they'll keep their mouth shut. I see. It's not the willingness or self-consciousness of the regulators of central bankers. That's the mandates, political authorities given to them. Right. It's a boundary and the restrictions. Okay. The only difference I can see yesterday and today is in the tool pit, we have more tools. But most of the new tools are still pinpointing to something against our last war, not our future war. Right. Okay. The only other difference is that people have a much larger scope, more emeralds. But those emeralds are still used to fight the war against the last war. Right. Not future wars. So we have more ammo, but perhaps the wrong kind of guns to fight the war of the future. We have some more emeralds and the right guns. But we got to have much broader vision to that. Right. And also we need a scientific building block approach to build up a monetary system, regulatory system, and the political information sharing system. Okay. So we don't have a broad enough vision to deal with the crisis that is inevitable. What do you say to that? Well, let me dodge that and just pick up a point that I really want to make here, because there's been a lot of talk about quantitative easing and how that plays in here. And I think quantitative easing sort of frightens a lot of people because you have this massive expansion of the balance sheet. So take the Fed, for example. It's added about $3 trillion more to its balance sheet as a result of QE than it would have otherwise done so. But I think there's a lot of misunderstanding about QE and how it might relate to this financial crisis issue. I mean, bear in mind, we didn't just have a financial crisis back in 2008. We had the deepest recession since the Great Depression, GDP plummeted around the world, unemployment went through the roof, and serious disinflationary, if not deflationary forces were unleashed in the global economy. So central banks had to respond and QE and zero interest rates are exactly what central banks need to do in those circumstances to try to stop the downfall and then get a recovery going. So that's what they've been doing. There's a lot of misunderstanding about QE. For example, people always talk about the liquidity that's being injected into the system. So the Fed has injected this $3 trillion of liquidity, but bear in mind there are two sides to the balance sheet and the only way the Fed can inject $3 trillion of liquidity is by sucking $3 trillion of MBS and long-term securities out of the market. It's a dollar-for-dollar asset swap that the central bank engineers. So it's not quite as sort of fearsome as it might sound. Now, there will, again, I agree with really everybody that's raised the point that in the normalization process there will be stresses in markets, asset prices will adjust. That's a good thing because we've been through this prolonged period of abnormally low interest rates and liquidity. And the Fed will only take these steps if it sees a recovery on the horizon. So people worry about capital flows out of EM. Yes, we saw a taste of that with the taper tant from last year. Talk about the fragile five or the fragile seven. To a certain extent, the system actually in EM has been stress-tested. I would argue to a certain extent, I don't wanna sound too blasé here or too sanguine, but to a certain extent has been inoculated against the eventual withdrawal of monetary accommodation. But the withdrawal of monetary accommodation is essentially a good thing because it can only happen if the economy is getting back to a normal situation, which itself is good for emerging markets. If I was to worry, literally, about one thing in emerging markets, it would be about China. The one shoe that has not dropped in the global economy, of course, is some kind of stress event in China where you've had an investment-fuelled credit boom. Just one final comment. Now, I'm not saying that's gonna happen. I'm not saying if it were to happen, that would turn into a global financial crisis. But if we're worried about regional pockets, certainly that's something that needs to be discussed. Just the final point. I think Professor Liu has served, given us a very good jolt here in terms of flagging some things we're not thinking about. I suspect that if there were to be a global financial crisis over the next few years, it would probably come from something we haven't been discussing. Lightning doesn't strike twice in the same place. For example, a major cyber-terror attack that took down the global financial system nodes. An asteroid hitting the earth. One of these health scares going global, an Ebola, SARS kind of thing. Something like that, what we're not actually thinking about or we can't control, some sort of exogenous event certainly could happen. But I think the things that happened before that were now on top of are probably not gonna be the cause. Thank you, Paul. We're now at that part of the debate where we can start taking questions from the floor. Who would like to go first? Ooh, lots of them. How can I be democratic about this? I'll come to you first. The new gentleman, Tamera, you'll go third, please. Sonia Medina, the Children's Investment Fund Foundation. I'd just like to pick up on your last point on the black swan. Climate change could be one. I like the panel's reaction, if possible, about the concept of a carbon bubble, as you may know, refers to the idea that if governments implement their plans to avert the worst impact of climate change, the actual reserves today of fossil fuels, far exceeds where we can burn. And therefore, they are today theoretically worthless, but have a price in the market. So there is a carbon bubble. You'd like to direct it to one panelist? Who would you like to direct it to? I love the reaction of the whole panel. There's only time for one. Please choose one. Since you mentioned the black swan event. So is the regulation able to handle a carbon bubble? Is it a threat to financial stability? Carbon bubble, can we handle it? Well, can I handle the question? It's the question. I haven't really thought about carbon bubbles. It's not something on my radar screen. So let me thank you for that question, and I'll go back to my colleagues and see if anyone has thought about carbon bubbles. I'm not quite sure. A bubble is, again, the word bubble gets thrown around an awful lot. And I think we need to go back to the basic definition of a bubble, which is essentially some asset price, which is increasing, and the increases in asset prices themselves generate expectations of further asset price rises, which then becomes a self-fulfilling process. And that goes on and on and on. And of course the problem with the bubble is that you get a bigger and bigger deviation between what asset prices are doing and what the fundamentals are. Is there any bubble on your radar right now if there's one asset you could think of? Well, I think there are certainly some property price bubbles probably developing, but I don't think probably anything of the magnitude that we've seen, say in Japan in the 1980s. The thing about bubbles is, we debate about bubbles while they're happening, is there a bubble or is there not a bubble? If there is a bubble, it always bursts. That's the definition of a bubble. But one other point when I've got the floor, like very quickly, is on QE and liquidity, et cetera, we have to be careful not to mix up the transmission channel of this easy monetary policy which is designed to have an effect on asset prices which will have a stimulative effect on the economy and a bubble. Oftentimes, I think people see the transmission channel of monetary policy and mistake it for a bubble. There are some bubbles around the place, but not of a scale or magnitude that would really cause big problems. Thank you. My name is Shane Pada. I guess I really agree with Professor Lou's perspective. So my question is for Mr. Whitfield. And the question is, and I'll just give you a little bit of context. I would respectfully disagree. I don't think the banker culture has changed at all. We still see the arrogance of Jamie Dimon at JPMorgan until the London Whale incident. No one's gone to jail. No one lost their job. Other than the poor guy from Bank of America, I forget his name. So all that is still in place. I'm not as big a fan in terms of regulators being able to fix stuff. I do agree that the George Bush response that Marcus will self-correct doesn't work. It's like saying to a heroin addict, you'll regulate how much heroin you take. It just doesn't work that way. Let's come to the question. So there's two approaches. One approach is trust regulators like we have. Why not go back to using structural reform? Put Glass, Deagle, back in act. Make retail banks have no more than 5% of the deposits for any one bank. And so all of a sudden, no one is too big to fail and solve the problem once and for all that way. That's a good question. Yeah, look, clearly there are lots of ways you can approach the problem if you take your perspective. I would say the cost of that is unacceptably high. So we can absolutely make the whole system as close to fail safe as possible. But there is an opportunity cost of that safety. And I'm certainly not here trying to defend the culture in banks globally has all moved to now be not self-interested. That wasn't my point at all. My point was that there is much more emphasis, attention, rigor and debate on what is the right type of risk management culture having tied inside financial institutions. And let me assure you, it absolutely has the attention of boards and management. I'm not suggesting that it's where it needs to be, but I'm suggesting that conversation has started and it's certainly progressed a long way from where we were. The point about the regulatory progress we've made is about, I think the point that a couple of panelists have now agreed with, which is it's unlikely that the future financial crisis is going to look and feel like the previous ones. So we have now put enormous amount of regulation into fix something that looks and feels like the last crisis. So I agree with Professor Liu, the future one may come from a different perspective than the last. We do have more tools to deal with it. What we don't know, and it's always going to be untested, is can those new tools deal to that future nearly unpredicted crisis? I actually just think the opportunity cost of your suggestion is far too great for world growth. Thank you. Taimou, then the gentleman over there, and then the lady over here, please. Actually, my question was going to be quite similar to that one and to Mr. Whitfield, not that I want to gang up on you, but I just would like you to address that human element. I mean, it's all well and good to look back, identify previous weakness and block it. But the problem wasn't the weakness, was it? The problem was the culture that looked for weakness and exploited it so ruthlessly as to destroy the entire system. Is there still in the system the same kind of ideologically driven blindness that's made Alan Greenspan sit there and say, no, there's no such thing as a bubble and the kind of greed that drove the bankers to create the products to take that money out? And is that not something that should be part of the thinking, not just regulatory rulemaking? Absolutely, and I think that's exactly what we're facing into. So the point about the emphasis on the culture is because clearly the culture of the banking industry was found wanting. So that piece, I think there's broad general acceptance for. So the insightful part of your question is, has it changed, and if so, has it changed sufficiently to mean we will end up with it in a different place? We need to supplement to not rely on culture as the only piece, but my point is we need to change the culture to support the regulations and that's where the word conduct becomes essential. To put the emphasis and the owners on the bankers that the responsibility of the trust, the relationship between the customer and the banker is that you need to act in the customer's best interest and then allow a system that can have regulators test whether that is actually the actions are matching the words. Is your safety mechanism? I'm certainly not saying that's where it needs to be, but there is a lot more intensity, a lot more focus and some unbelievably large fines that are directing that attention. There will always be in many interests, in many industries, self-interest behavior. I think Professor Liu wants to come in on this. I do want to bring in the other two questions. One point to your good question. With the progress today, it's not the issue of if we got to change the culture, we got to cultivate the new culture and to cope up with those invisible challenges and the risks, but the problems in my eyes is how and when, how fast you can do that. So it's still a very perplexed issue because nowadays if you look at the financial circle and those beyond traditional banking or insurance or security firms and still you can see that a very strong culture of herding behavior, okay? It's a me too policy. So this is a terrible culture in every institution. Herding is still loudly plowed in organizations while disorder is discouraged, okay? And the regulators couldn't do nothing, could do nothing about that. So everywhere you can still see the searching for years, leverages and in the arbitrage, all these things happen with every day. So that's the reason why I worry then concern a lot about the reverse operations of the QE. In long run, the reverse operation of QE is good, okay? We got to forget the QE is like that. First of all, we have a question here from Mr. Bichai. But the problem is that every percentage point of the drop or the U.S. rate will cause two trillion U.S. dollars fell because a lot of people are doing the arbitrage in this world, that's the behavior. Go ahead, please. Oh, I come from China National Radio. I have a question for everyone. What are your suggestions of the development of Hong Kong as an international financial center and Oshur IMB Center in the post-financial crisis area? Thank you. Helen, could you take that please? Hong Kong is an international financial center. Sure, I can make some brief comments, but I think Professor Liu is very much the expert on this topic. I think it's the inevitable direction that we must go in. It's something that we've made meaningful progress in terms of advancing towards. I think it's something that will continue to see meaningful further advancement in the next two to three years. I think that is very much on the agenda of the current policymakers, but it comes back to the earlier points of tying in more closely with the global financial landscape and therefore potentially increasing the risks and transmissions and shocks felt between China and the rest of the world. So I think it's something that one needs to be very prudent about and make sure that all the mechanisms are very much in place. I do see that happening at the moment and it's something very exciting. Thank you. Ma'am. Thank you with China Business News, actually I have two questions. First, for Paul and Mr. Liu. And the question is that Paul has mentioned that the stress in China may cause the regional financial crisis and many concerns actually has a reason about the Chinese credit acceleration in the recent years. And what's your point on this, Vail, and so it's kind of a assumption. So what's kind of your concern in China's stress event which would produce a regional financial crisis? The first one and the second one is with the development in internet finance with this becoming a new form of course to a new format of financial crisis. Have you got kind of opinions or any principles on the regulations over this issue? This is for Mr. Liu. Thank you. We take the China credit issue, please. Yeah, so the worry of course here is simply that everybody knows that China has performed incredibly well after the financial crisis. It's actually grown at about on average 8.5%. Think about that for a second largest economy in the world growing at 8.5% through the most difficult period since the Great Depression. But that didn't happen by accident. That happened because policy makers moved incredibly quickly and forcefully back in 2008 to pump up credit and push credit through the banking system into infrastructure and housing investment. And the sort of macro numbers that you'd look at there, things like the investment share of GDP gone up substantially, credit as a share of GDP again has gone up dramatically. So there's a sort of credit overhang and an overinvestment overhang that has to be digested in China and that just represents some risks. And one of the potential triggers and challenges for the policy makers is that China is also embarking on financial liberalization and reform, et cetera, which could also potentially destabilize the system because of these legacy issues. So I'm not saying it's inevitable but I'm saying it's a big challenge for policy makers. Thank you. My apologies. We don't have time to give the second part of the question. I'm sorry I couldn't bring you in. So we've come to the end of our time but before we do let's look at the results. So we'll have to Paul ask you to vote for your answer to the question one more time, please. Is another global financial crisis inevitable? Stop voting Paul. Let's go. Can we vote? No. Have you changed your mind? Scared me, that's 90 days. Okay, let's put up the results, please. Okay. Okay, so... Like an interesting lucky. Very nice. The Yes Camp has lost three percentage points. Still shifting. But it still is pretty much unchanged. Two thirds saying that another crisis is inevitable and a third saying that it's not. Look, I'd like to first of all thank the panel particularly because we know that life is a lot more nuanced than just yes and no. We set it up as a binary in order to flesh out the extremes and I really want to thank you for being really good sports and doing it that way. And of course thank you to all of you for being here. Thank you. Good being time. Thank you.