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Cunliffe on financial system and increased risk taking in markets

  • Banking system is in a robust state and has come through the crisis "pretty strongly" and stress tests suggest banking system has capital it needs to support the economy coming out of the pandemic.
  • On financial markets, saw some vulnerabilities in March 2020 with dash for cash on a global scale. "Exposed fault lines we need to tackle". Some assets highly valued versus historical precedents and that needs to be monitored.
  • Asked on increased risk taking in financial markets and how loose monetary policy contributes to elevated asset prices. Cunliffe says that some of the activity is due to the good news as we come out of the crisis and the underlying strength of the economies. This can move around a little bit with the "health news". BOE has supported through this period. In terms of search for yield, looking at compression of corp bond spreads, question is whether people are just searching for yield and possibly not taking account of enough risks going forward.

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