The new monetary policy marks the shift from low for long to higher for longer interest rate environment. Over the past 15 years, we've had an expansionary monetary policy, but we also had a wave of regulation. This had had impact on number of levels. One, on the overall level of debt in the system. Two, on how this debt was distributed across the various players. And three, on the risk taking dynamics.

Let me illustrate that. Bank balance sheet remains stable over that period of time. The constitution of that debt became less risky and more skewed towards liquid assets. Non-bank financial institutions and yield seeking investors played the financer role in the economy and gaining share from market participants. Governments took advantage of this low-rate environment and cheap debts to fund reforms, fund economic stimulus programs, and that helped us navigate all these crisis that, you know, we had to deal with. Central bank balance sheet also increased significantly, moving from 2 trillion to close to 8 trillion over that period of time. Then we had the perfect storm. All of the economic stimulus programs combined with the supply chain disruptions that we had because of the Covid crisis, but also because of the war in Ukraine, meant that we had to deal with two things. We had to deal with supply side driven inflation, but also demand side driven inflation. And to curb that inflation, the ECB had to raise rates and they had to raise it at a very fast pace, which was unprecedented.

These rapid increases came with consequences that are still unfolding for the various market participants.

Banks have to deal with higher cost of risk that are linked to highly indebted companies that would struggle to pay back their debt, higher cost of deposits, unfolding interest rate risk on the banking book, and exposure possibly to non-bank financial institutions that have picked up some of these assets that shifted from the balance sheet of banks into the balance sheet of these institutions.

Insurance companies have to deal with the readjusted prices of their securities portfolios. They have to deal with investor return expectations digging into the reserves to meet these investor expectations. They have to deal with the liquidity risk associated with it, and they have to step up on new collections to rebalance their portfolios.

For non-bank financial institutions, this means shifting towards readjusting the prices of their assets in their book, shifting their management attentions to value creation within their portfolio companies and managing investors.

Central banks, of course, will continue to act to curb the inflation while keeping an eye on financial stability for all the various factors that we've spoken about. And as they shrink their balance sheet, this will come at the cost that they have to deal with.

Public authorities will have to deal with higher cost of debt, which will constrain their margin of manoeuvre versus the previous period of time, at that time where all of the transition challenges remain ahead and there's a dire need for investments.

And of course, there are black swans. What are the hidden risks in the system that we need to anticipate? One event we can deal with it's the combination of multiple events that can lead to black swan: practitioners have to step up their crisis management capabilities to make sure that we are simulating multiple scenarios and anticipating what could come next.