Frank Elderson: Ensuring resilience in the face of uncertainty

It is a pleasure to open this joint ECB-Bank of England conference. Bringing together experts across disciplines from 18 countries and three continents to discuss how we can ensure resilience in an increasingly non-linear world, this event could hardly be more timely. For much of modern finance, risk management has rested on a simple but consequential assumption: with enough data, sufficient information about borrower behaviour, robust models and a solid understanding of historical patterns, banks can estimate the losses they may face with a reasonable degree of precision. These estimates inform how banks price risk, set aside provisions for expected losses and determine how much capital they need to absorb any large, unexpected losses.