Jon Cunliffe: Financial system resilience - lessons from a real stress

Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Investment Association Webinar, London, 9 June 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

The COVID 19 natural disaster has been the toughest test of the financial system since the global financial crisis 10 years ago.

As the implications of the spread of the virus and the policy measures to contain it became apparent, over a few short weeks, we saw an abrupt and savage pricing down of economic prospects and economic assets across the globe.

Investors, corporates, banks and households went into a defensive crouch, shunning risk, searching for safer havens, and stockpiling liquidity.

Many of the resultant moves were unprecedented. Bank lending surged as corporates drew down on their liquidity facilities. In March, UK banks' net lending to corporates shot up to £33 billion, around 30 times the average monthly lending seen last year.