Of High Frequency data we were waiting on. Example, the sox index, why is that rallying . Abigail it has mainly to do with trade optimism. A good portion of the Chip Companies from china, a good portion of the supply chain. Investors hoping the important shift is coming out of the bottom and phase and if 5g goes ahead, that create a major upgrade cycle. However, it does look frothy, so it is important to keep that in mind. Are investors getting ahead of themselves . Last year was a bad year for managers. As we go into the end of the year, you have to think managers want to lock is one in so they can have a good year after a bad year. Vonnie thank you. Kevin. Kevin volatility never stops. Now to this weeks historic vote on impeachment. Lets bring in our Clinical Panel of genevieve woods, spokesperson for the heritage foundation, and basils michael, former executive director of the new york state democratic party. Genevieve, i will start with you. In terms of impeachment, and terms of the senate, will Mitch Mcconnell be able to strike a role a deal on rules with Chuck Schumer. Genevieve they will have to. At the end of the day, republicans are in charge of the senate. If Mitch Mcconnell goes the way he wants to go, he will have to bring democrats on but you will see mcconnell leading the charge. Kevin to flip the question, wednesday is when we are expecting a historic vote on impeachment. I on 31 i have my members who flipped 2016 congressional districts that went for President Trump and then were able to win them for democrats. Hows this going to play in those 31 districts . Basil it will be difficult for a lot of those members. If you remember when democrats land when democrats ran in 2018 we tried hard not to nationalize these races and that is what helped us take back the house. It will be hard to do that when all sorts of these members have to take a formal vote for gas for or against impeachment. It will behoove all of those members to pivot quickly back to a policy discussion where in there when they are in their individual districts. It is not something they will be able to navigate away from. They will have to do with that in some way, shape, or form. I expected a few members would vote against impeachment. Nancy pelosi is anticipating that as well. Hard a line see as on the democratic side as you have on the republican side. I think at the end of the day that will be ok to keep the majority held. Worde we are just getting Chuck Schumer will holds will hold a News Conference at 2 00 eastern. While this is going on, do we get the signature of usmca . Basil i think we do. I think we have to. That is one of the policy positions democratic can take credit for. There are also questions about paid family leave. I think we do get that deal, i think we have to pivot quickly back to policy. Vonnie what happens to senators campaigning . January will be a busy month for those. What do those senators do . Basil you have cory booker not on the debate stage. Kamala harris is not running anymore. You have people you have people like michael bennet, elizabeth warren, bernie sanders, this will become a substantial part of their talking points. They will have to come away from the field, but i suspect they will be just as strong when they go back out and talk about why they had to vote the way they did to get rid of the president , even if he does not get convicted. Kevin i will be heading out later this week for continuing coverage. Genevieve, i want to stick with impeachment. In terms of the republicans, senator susan collins, senator mitt romney, all of the attention is going to be on some of those republicans in the senate who have been very critical of President Trump and how he has handled this impeachment. Is there room in the Republican Party for a republican senator to vote to convict President Trump . Genevieve i think it would be difficult to explain that vote to most of their constituents. You cannot like the way things have been handled, but the question is do you think it reaches the level of impeachment and you think you should be convicted. That is a question senator collins and mitt romney may not like the way the president has handled the situation, they may not like it but can they go to the level of impeachment. I do not think you will get there. I think the democrats would like some of this to go away because as you were discussing, many of their candidates will be taken out of the senate if the senate goes on with a full trial, which the president said he would like , he wants to try to clear his name and show he did nothing wrong. It will be interesting to see if they go fullblown with a trial or they go the other direction, which Lindsey Graham wants to do, saying lets get rid of it altogether. That will have a big impact on democrats more so than republicans. Vonnie briefly, i want to ask you about Amy Klobuchar. There has been chatter about how iowa is taking another look at her. What you make of it . What happens in iowa . Basil it is anybodys race. For a lot of folks who come in late, they are saying if no one runs the table in these early states, then super tuesday is where we make our stand. It is true that a quarter or a third of all of the delegates are available are up on super tuesday. Early states like iowa are great for immediate narrative, but in terms of the delegate count it as a small percentage. It is anybodys race, but im happy to see that Amy Klobuchar is challenging the leadership for iowa because she has a lot going on and we have not heard as much as i would like. Vonnie our thanks to our panel. Genevieve would and basil smikle in new york. We turned to Mark Crumpton for bloomberg first word news. Mark the house panel says President Trump betrayed the nation for his own political gain. The Judiciary Committee has released a 650 page report detailing its rationale for impeachment. The president faces two articles of impeachment by democrats. The house will vote wednesday. The vote is all but certain to result in President Trumps impeachment, though he is expected to be acquitted in a senate trial. The president is expected to announce american troop withdrawal drawdown from afghanistan as soon as this week. Speaking from kabul, Lindsey Graham said the drawdown could begin before the end of the year. He said afghanistans National Security forces are up to the task of defending their country. Still, graham has opposed to full u. S. Troop withdrawal. In france, transport strikes against the planned overhaul the Pension System continued for a 12 day. Authorities measured a record traffic jam of 391 miles of traffic in the paris region, were only two metro lines using automated trains with no drivers, were fully running. Most regional and national trains were at a standstill. Emmanuel macron has proposed raising the retirement age to 64 and ending special privileges for some workers. British Prime Minister Boris Johnsons government will introduce its brexit built a parliament this friday. The Prime Minister will not have a problem getting a mandate to ratify the deal. The question is whether the government can get the bill to a vote this week instead of having to wait. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am Mark Crumpton. This is bloomberg. Vonnie thank you. Speaking of brexit, the bank of england just out with its latest Financial Stability report. In it, it is recommending tighter rules for openended funds. It is also going to raise the countercyclical buffer to 2 in a year, up from 1 . We will get the results of the Bank Stress Test and much more in a few moments. Will be hearing from bank of England Governor Mark carney. That is at the bottom of the hour. The First Time Since the general election. Power onalance of Bloomberg Television and radio. Phase one will be implemented right down to every detail. It is a remarkable agreement. It is not going to solve all of the problems. Lighthizerert speaking on cbss face the nation on the phase one trade deal the u. S. Just reached with china. Joining us with reaction is tom vilsack, the president and ceo of the u. S. Dairy export council , also former agricultural secretary and former governor of iowa. Welcome. How are your members reacting to the phase one, even as we await details . Is a wait situation with china. As they say in trade, nothing is agreed to until everything is agreed to. With china, nothing is agreed to until everything is implemented. Ambassador lighthizer is right and that the key is whether china will follow through with the agreement. For dairy, there may be opportunities. It appears there may be sanitary barriers that may be removed. With china, you would have to see them in action before you can confirm whether or not it will be a good deal. We can react ae little more to the usmca even though it has not already been signed either. How are your members reacting to the idea that exports to canada are now given the green light . They are excited about the opportunity the usmca presents in terms of new Market Opportunities and the limitation of the class seven discriminatory Pricing System that has distorted powder prices throughout the United States and throughout the world. They are also excited about the opportunities the new japan agreement has created for dairy to reopen and reengage in that market. In terms of shortterm opportunities, i think the usmca and the japanese agreement are where we are focused. If something gets worked out with china and results in additional sales, that is all to the better. Kevin i want to go back to china to that point. You alluded to this. Nothing in the framework we have seen and the reports we have seen of phase 1. 2 enforcement mechanisms. How will this be enforced or do you just still you still need more answers on how this will be enforced . I think we have to take a look at the details of the agreement once it is signed. There has been discussion about reengaging with the tariffs being reengaged or reestablished. That may be an enforcement mechanism. Ambassador lighthizer indicated that might be the way in which he would enforce this agreement. Clearly there has to be an enforcement mechanism because the chinese are famous to agreeing to quite a bit and never following through. That is why theres is a wait and see attitude on this agreement, especially as a relates to the dairy. Kevin does phase one suggest phase two not happen in 2020 and might wait until 2021 or is there anticipation phase two will begin in the next calendar year . It involves aif fundamental change in the way china does business, well take a considerable amount of time. It may take more than the United States raising issues. The reality is many countries get mistreated by china in terms of investments in china. The intellectual property issue was also raised. It will be incredibly important for the u. S. To work with the rest of the world to go to china if we are going to see fundamental change in the way china does business within china. Vonnie for the moment your farmers are looking north and south. A drop inyear four of prices. Deal give them some relief . Does canada want the melted it caneceive the milk now receive . We have seen an increase in exports, an increase in the value of u. S. Export, and we have begun to see an increase in the price farmers are receiving. Perhaps some relief from the difficult times over the last couple of years is occurring in 2019, and we expected to continue in 2020. Additional Market Opportunities in canada when class seven goes away, that should stabilize powder prices, putting us in a better position, and the new opportunities in japan bode well for 2020. Vonnie you are a supporter of joe biden. He has been struggling in iowa. I am curious how a democrat wins what has been trending towards red in iowa in decent type in recent times. Democratic candidates have done it decent job of reaching out into the small communities that dot the landscape of my state. 800 and 50 communities have populations of 1000 or less. 850 communities have populations of 1000 or less. I amportant to talk praised with Vice President bidens plan to rebuild the role economy the rural economy. I think we will get a better messaging to rural iowa which should shrink the margins and put us in a competitive circumstance in november of 2020. Vonnie thank you for your time and congratulations on what looks to be a good time ahead for farmers. Agriculture former secretary and governor of iowa. Kevin still ahead, we will stick with iowa because janitor Chuck Grassley, his views on the because senator Chuck Grassley, his views on the china deal and more. Ons is balance of power Bloomberg Television. Vonnie this is balance of power on Bloomberg Television and radio. I am vonnie quinn. Kevin i am kevin cirilli. Joining us from capitol hill is senator Chuck Grassley and chairman of the finance committee. Thanks for being here. About the usmca and its likely ratification. How much of a win is this for farmers in your state . Sen. Grassley very good and i will probably be duplicating some of the things my friend tom vilsack told you. Very good for Dairy Products and wheat into canada. Weve been blocked out of that for the last three decades. That has been a big move. The other thing is what it does for employment in rural america. Partse a lot of component manufacturers for automobiles in iowa and a lot of those may have farmers that also work in town. I know there is a lot of that that goes on in my state of iowa. Those workers will be enhanced as a result of this treaty as well. Kevin on the one hand you have usmca, on the other you have the u. S. China phase one deal. Suggestions there will be massive agricultural purchases made. Hows is that going to impact you . Are you skeptical of how the phase one will be enforced . Sen. Grassley last friday was a big day for the president of the United States. The first president in a long making unfair trade the issue he ought to make it. I think he had two big accomplishments last week. We talk about intellectual property, trade secrets, manipulating the currency, transfer of technology to china, those things are going to be harder to measure. To answer your question, when china says they will buy 40 to 50 billion of Agricultural Products, that is going to be easier to measure. We are going to know pretty soon whether or not they are taking that to heart. Agreement thatr was made friday. Therell be a state to state by the American Business in china, including our Agricultural Products if we are not treated fairly, there will be a consulting process that does not exist today where u. S. Businesses and farm groups can d. C. ,in to washington, can intervene for them with the government of china. Vonnie senator grassley, how close is Mitch Mcconnell to setting the rules for impeachment and how it progresses in the senate . Obviously iy cannot answer for sure, but i can tell you what the process is going to be. And how far down this process i do not think we are very far yet. There is going to be a great deal of consultation between Mitch Mcconnell and Chuck Schumer to see if what happened in the Clinton Administration can be repeated for this impeachment. Zero,as a vote of 100 to complete bipartisanship on how you ought to proceed. Will go on between Mitch Mcconnell and Chuck Schumer, and then if those are not fruitful, assuming republicans have a majority, and we have 53, but we have captive 51 votes but we have to have 51 votes to accomplish this, we may have to go on around, but that is not the way Mitch Mcconnell wants to do it. Mitch mcconnell wanted to be smooth as it was in the clinton impeachment. Vonnie went as usmca get signed given that this is about to start . Sen. Grassley i would guess from my talks with Mitch Mcconnell that it will be up immediately after the impeachment is over. In other words, the president is guilty or not guilty. There is a feeling they have not made a good case. He may not be guilty. It could still take a long time to make that determination. When that is over, we will take it up and there is a limit of 20 hours of debate and it can pass with 51 votes so we do not have to worry about getting a supermajority. We do not have to worry about cutting off a filibuster. Vonnie thank you for joining us today. That is Chuck Grassley. Ons is balance of power Bloomberg Television and radio. This is balance of power. The Impeachment Vote in the house is a crucial test for more than two dozen vulnerable democrats. They represent districts that President Trump won in 2016. A number of them say they have not decided how they will vote. In democratic majority the house depends on keeping those districts next years election. Canadian Prime Minister is beginning his second term with finances in much worse shape than expected. That is before liberals move ahead with tens of millions of dollars of campaign pledges. New estimate show canada is on track to run a deficit of 20 billion this year. And 2023between 2019 are expected to exceed projections by more than 26 billion. Onbal news 24 hours a day air and on quick take by bloomberg. Crumpton, this is bloomberg. Vonnie the bank of england Governor Holding a news , his first postgeneral election after the boe published a Financial Stability report. Todays Financial Stability report provides an example of each of these. We will start with issues that relate to addressing nearterm risks and beginning with the banking sectors. Stress test shows the u. K. Banking system would be resilient to an unprecedented combination of simultaneous recessions in the u k and global economies that are more severe than those during the Global Financial crisis, large falls in asset prices, and a separate stress of misconduct costs. In theen major banks test can not only withstand extreme shocks but meet the demand for credit from u. K. Households and businesses. Ratios are three times higher than they were at the start of the Global Financial crisis. After stress capital ratios would be more than twice precrisis levels. The banks resilience in the test relies on their ability to cut dividends, reduce employment if banks had not cut such distributions during the stress they would not have an aggregate met the 2019 approval rate. Demonstrates the flexibility of the system but underscores that investors should be aware the banks would make such cuts as necessary if they stress were to materialize. Turning to brexit, the amp ec will provide a high level update on the u. K. s economic prospects this thursday. Their job is to focus on and prepare for were side Downside Risks worstcase Downside Risks especially those associated with the disorderly brexit however unlikely. They continue to judge that the Financial System is ready for brexit, reflecting extensive preparations made by the authorities and the private sector against risks that could arise in crossborder services they welcomed the european commissions decision to extend the temporary equivalence arrangement related to u. K. Ccps. Turning to structural actions to improve resilience and increase productive finance, stepping back from current risk, looking at the structural issues and reviewing the structural level and the balance of capital wire meant in the u. K. Banking system , they have made they are raising the level of the u. K. Countercyclical capital buffer, to 2 . That rate since we are in the standard risk environment in our judgment a new 2 u. K. Cc why the rate cyb rate will c take effect in one year. Next year onult proposals to reduce minimum Capital Requirements in a way that leaves overall loss absorbing capacity in the Banking System unchanged. The bank of england is clarifying that in the event of a Bank Resolution it expects all to be written down or converted to the highest quality of capital, or common equity tier one. These changes taken together increase the resilience of the system by shifting the balance of loss absorbing capacity towards higherquality capital while leaving the overall loss absorbing capacity broadly unchanged. Tier one Capital Requirements for major u. K. Banks will remain in line with benchmark levels , 14 of015 riskweighted assets. That benchmark balances the need for banks to keep lending during downturns with the need to provide finance to support growth over the medium term. These changes improve the responsiveness of Capital Requirements, Economic Conditions by shifting the balance of Capital Requirements from the minimum requirements that must be met at all times towards buffers that can be drawn down as needed area if the rate were cut from two to 0 this would enable banks to absorb up to 23 billion pounds up to 500 preserving billion in Banks Capacity to lend to u. K. Households and businesses. The u. K. R setting up countercyclical buffer in standard conditions will allow gradualto pursue a approach to raising the buffer has risks increase. Finally these changes enhance the resolve ability by the bank of englands intention to write down or convert debt to capital. This will make banks more resilient to future losses, and minimizing wider economic costs of their failure. Market to the mortgage they have reviewed Mortgage Market recommendations, namely a 15 limit on the amount of new mortgage lending at or above 4. 5 times income and its recommendation that lenders assess whether borrowers could meet their mortgage payments if Interest Rates rose by three percentage points. Mortgages are the largest financial liability of households. The past as an economics expansion has progressed underwriting standards have shifted from responsible to as a consequence these households are likely to face greater difficulties and can cut back more sharply on their spending to make mortgage payments. And stephens the recession worsens the impact on the wider economy. The tools maintain Financial Stability and support Economic Growth through the cycle providing benefits that outweigh the macroeconomic cost. Alternatives to achieve similar benefits would be much more costly to the wider economy. Insurancee fpcs policies Monetary Policy would have to be tightened to address the Financial Stability risks of deteriorating underwriting standards and rapid credit growth. This would reduce jobs and growth across the economy. Banks will be required to have higher capital ratios, this would raise the cost of credit for everyone. They have judged that it is appropriate to maintain both recommendations the structure and the structural recommendation should stay in place throughout the housing cycle. Liborued reliance on proposes a risk to Financial Stability that can only be reduced through a transition to alternative riskfree rates. The intention is that sterling libor will cease to exist after the end of 2021 and no firm should plan otherwise. There are encouraging signs in serving markets and the fpc endorses the u. K. Industry working group us target to seize new issuance of cash products linked to certain libor by the third order of next year. That the largest regulated firms with material libor exposures should have a senior manager responsible for caps remainn the and efforts will need to accelerate in the first half of 2020. Currentlyf england is reviewing its Risk Management approach to libor linked collateral delivered in its sterling monetary framework. Furtheris considering supervisory tools that could be toloyed by authorities encourage the reduction in the stock of legacy libor contracts to an irreducible minimum ahead of 2021 area we will keep them under review in light of rogers it by firms in the transition. Turning to the promotion of productive finance, the mismatch between the redemption terms and the liquidity of some funds assets means there is an advantage to investors who redeem ahead of others, particularly in stress. This has the potential to become a Systemic Risk as first mover advantage could prompt a destabilizing rush to the exits. As part of the ongoing review of openended ones i the bank the fpc has established that there should be greater in between the liquidity of a funds assets and its redemption terms. Ofcifically the Liquidity Fund assets should be assessed either as the price discount needed for a quick sale from a vertical slice of those assets or the time. Period needed for a material price discount. Investors who redeem should receive a price for their assets that reflects the discount needed to sell the required proportion of a funds assets in the specified redemption notice window. The redemption notice period should reflect the time needed to sell the required portion without discounts beyond those captured in the price received by redeeming investors. In addition to enhancing Financial Stabilitys these changes are expected to promote the overall supply of productive finance to the economy through the business and financial cycles. The will enhance both ability of funds to invest in the liquid investments and increase investment in funds with longer redemption terms. Turning to Payment Systems, innovation in payments could bring significant benefits to users including lower costs and faster processing times. The ability to transact safely and smoothly is critical to Financial Stability. Fpc considers that the current payments framework will need to be adjusted to accommodate new innovation along with following principles. Shouldion of payments reflect the Financial Stability risk rather than the legal form of payment dividends. That can lead to systemic importance of any single firm that should be informed by whether its failure could disrupt one or more ancient and systemic payment change. All firms above a certain threshold carried out the activity that takes up the payment chain and should provide. Ignificant information stable coinbase payment change pose an issue for regulation. That you stable coin should be regulated to standards equivalent of those applied to traditional payment chains. Where stable coins are used in systemic payment chains as money like instruments they should meet standards equivalent to those expected of commercial bank money in relation to stability and value for buses and legal claim and the ability to conclude, as the latest stress test indicates the core of the u. K. Financial system would be resilient to the crystallization of a number of current risks ranging from to tradeanges relationships, sharp movements in asset prices, and deep economic downturns. This preparedness is an jobntial part of the fpc but only an element of its responsibilities. By reforming bank capital standards. By continuing our mortgage mothers in order to provide assurance insurance against the approach meant of irresponsible lending standards. We are supporting efforts to replace libor, to reform openended funds and oversee new Payment Systems to ensure that more sustainable and resilient productive finance is widely available. Through all of these actions to reduce risk to Financial Stability and to improve the Financial System we are doing our part to promote the goodness of people of the united kingdom. With that we would be pleased to answer your questions. Wait for the mics. Give your name and organization. Simon, bbc news. Governor, have you reviewed or changed your view of the risks posed by a disorderly brexit . Given the events of the last week . As i said in my opening comments, our job is to look at the worstcase scenario. The worstcase scenario is a no deal, disorderly brexit. The probability of that scenario has gone down. Because of the intention of the new government. The scenario itself and that which the risks that we protect the tailagainst risk against which we have insured has become less likely. ,hat you would expect us to do and what people would expect us to do is to continue to ensure that the system is ready so that the Financial System is not forming a constraint to whatever negotiations are underway or discussions are underway. The probability clearly has gone gone down. News, one of the phrases that comes up often is brexit related uncertainty. The going to talk what is your sense of what this implies for the Financial System . Are you getting already a sense from what markets are doing that tells you whether that uncertainty is diminishing . Reassessing a are host of political uncertainties, potential policy paths for the u. K. And probability probabilities around brexit. Perspective what we have been doing is preparing for the worstcase scenario. Deal and ave a transition to that deal we will continue to have arrangements in place, whether they are additional liquidity to ensure that the capitalization of banks are consistent or an arrangement the temporary but important crossborder arrangements that have been put in place around the markets. Which are the product of discussions with ourselves and european officials. As a bridge to the final willionship area we continue to ensure against that tale. As the country moves forward. Brian from bloomberg news. That brexit goes through on january 31 as the current government policy is, do you still have brexit risks in your stress tests for next year or have they morphed into Something Else . In this stress tests we did not have brexit risks per se. What we had in the acs stress test that we ran over the course of last year, we had a very severe global downturn. Quite substantial come out right in a session, negative growth in china and hong kong, sharp falls in asset races. Independently a sharp recession in the united and including with unemployment going up 100 and Interest Rates going up several percentage points. Gdp is down by more than 4 . That was not a brexit stress per se. About a year ago we had the we revealed a separate brexit analysis that we had been doing. We had wanted to make sure that the severe stress tests encompass what could happen if we had a brexit stress but not just a brexit stress, a disorderly brexit. A tradethe same time war and a sharp global downturn. The system could withstand both of those events, on top of that a bigger increase. Brexit was less of it less severe in aggregate and the stress we are subjecting the system to. Will finalize its judgment on the type of stress that it will run next year and we are in current discussions on that. I cant say exactly what they would be. Different from the type of stress we have had in the past. The banks changed a bit with time but they dont change that much. We ran a couple of years of a certain type of stress which gives us the confidence that we have been encompassing that we have encompassing brexit. Naturally i think the committee will want to look at different types of risk for the 2020 stress. From the times, can i ask if you place any contingency measures if there been a labor majority. We did not put any special contingency measures in place. We have had contingency measures possibility ofe a no deal disorderly brexit, most importantly the pra supervisors have been monitoring liquidityand positions in aggregate of the major banks and Building Societies but also the foreignexchange liquidity positions of those institutions. That has been running for quite some time. We have had a series of potential over the course of this year and we were potentially heading we still are but potentially heading to another one at the end of january. It goes to a more general point which is that part of the value of stress testing and that itncy planning is also prepares you for things you dont necessarily expect, other events can happen, Financial Stability events can happen. As we look at different scenarios and prepare for different events, as we prepare for this and think different, itrely may have a genesis but that preparation will at least be helpful in that circumstance. Tim wallace of the telegraph. Or anor, if brexit disorderly brexit is a lower probability event what do you see as the most significant risk to the u. K. Financial system . Globale is a host of risks, the Global Scenario that is admittedly quite severe, it could be triggered by a deepening of the fragmentation of the global , certainystem geopolitical or political events beyond our shores. Are wethat there are conscious of mediumterm ,isks from indebtedness corporate indebtedness and Household Indebtedness in general. We are reassured by a couple of things in the u. K. Which is that the underwriting standards have ,eld in, not just on mortgages but on Consumer Credit where the pra has been active. We are seeing that and those of state allies the underwriting standards have stabilized. We are also reassured that u. K. Haveholds in general they worked hard and pay down debt at least in relative terms. They were in a better position. What you do in those circumstances is to make sure that you have the appropriate buffers in the end in that environment so that if risks did start to build you could act in a timely fashion. Ms. Doesnt result on average and much of a change in the overall loss absorbing capacity but it puts us in a position that if risks were to start to we could more readily get the buffer to a level that would make a material difference if we had the type of build up and risk that we have seen in other more extreme risk environments. I would just say on the raising of the ccyb standard risk environment to 2 , for example if you look back at the crisis, the precrisis period, the indicators did not start moving until 2004, 2005. Seeing the indicators of risk moving, there may not be time if you can transfer loss absorbing c2 buffers in the way we are doing it means you could get to the level you would need to get, we would have needed a between 3. 5 and 5 by the time we reach 2007 or 2008. This gives us a chance to move gradually towards that. [indiscernible] leveraged loan losses are up in the stress testing, how concerned are you at the rising level of leveraged lending and the declining standards in that sector . Let me start and i will ask sam to expand. We are concerned it goes back to tims question on where we see offense of risk. The sharp buildup in leveraged lending particularly into the area wherees is an we do see a steady buildup of risk. The quality of those loans has to syria rated and that is part of the reason why we spend as much time as we have in the past couple of years to try to follow the money. Reas the actual exposures recognizing these are largely exposures to the u. S. , im , whichplifying institutions have which types of exposures and how big are they relative to the size of their capital bases. You have been listening to the bank of England Governor Mark carney. Our tv viewers will continue with that. For our radio listeners we will pick it up with balance of power. Are listening and watching balance of power on bloomberg tv and radio. Exposures to the leveraged loan market, we define it as u. K. Banks around 90 million. That is obviously material. Dove deeper into those this year and you need to think of them as being we haves which is higher than what they experience in the Global Financial crisis. We think that is reasonable given the district different Interest Rate path that we had. Then there is what we call a pipeline which is 11 billion out of that 90 billion. Exposures to those a pretty severe trade risk ends up something around 17 . They take losses of about 300 million. Putting them together we are confident that we have a good read on it and we have the coveted capital. , that it in perspective is13 of the corporate it important for the u. K. Banks and it is important that we are on it. I think the Bigger Picture is the one the government is touching on which is the overall dynamics in that market. Caroline and diane. Caroline from the financial times. Revealed the report the latest thinking about openended funds. Should there be restrictions around retail customers ability to invest and hold liquid assets . I think the strong desire is not to have those restrictions to have a structure making available opportunities for Retail Investors on a fully informed basis to invest in what could be very attractive assets which are longerterm assets or more liquid term assets, assets withare not commensurate liquidity. It is not the equivalent as you well know of having a bank account and having instant access to the funds. That should not be something that Retail Investors find out in a dating or severe situation. This is something they should know in advance and have an expectation of how long it will take. When we look at this we look at this from a Financial Stability including how any changes to the structure of these funds could impact the supply of productive finance. The Investor Protection market we areissues seeing a fairly strong overlap between those interest between fca and the fpc and the we are working closely together on these issues with the joint review. Are what we are sharpening our thinking around which is three elements. The first is that the funds should make estimates about liquidity of their assets. And that is not just one type of asset. They should put their assets into liquidity buckets, so to speak. The quiddity in that regard should not be about whether something is listed or not, or has certain certain technical characteristics
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