Regulation and innovation: mutual benefits

Ladies and Gentlemen,
 

The financial sector is engaged in an unprecedented dynamic of innovation. New technologies offer vast opportunities in the field of financial services but bring also a variety of risks. This ambivalent impact of innovation raises obvious questions for central banks and supervisors in charge of financial stability: how can we ensure that financial stability is maintained in such a changing environment, and that customers and all stakeholders have confidence in the financial system? In Europe, part of the answer to this question is provided by adapting our regulation tools to help harness benefits brought by innovation while controlling risks. However this approach raises questions: is there not a risk of hampering innovation and therefore competitiveness of the financial sector in the name of controlling risks?

This morning I would like to share with you a strong conviction, which may seem iconoclastic in the current context, and perhaps even more so in this country: there is no point in opposing innovation and regulation. Jean Monnet, one of the fathers of European integration, famously said: ‘Nothing is possible without men, but nothing lasts without institutions’. In the same vein, I would say: ‘Nothing is possible without innovation, but nothing lasts without regulation’. 

This is particularly true, I believe, for the financial system, and I would like to illustrate this in three critical areas for the prospective safety and efficiency of the financial sector – DLT-based finance, artificial intelligence (AI) and cyber risks.