22 November 2019

Bank of France's Beau: What policy framework to help building innovation and growth into Europe's capital market?

Speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the AFME Annual Capital Markets Technology and Innovation Conference, where he spoke about the challenges linked to innovation.

We have to identify clearly the challenges raised by innovation and be ready to adapt our policy framework if we want that innovation goes with sustainable, inclusive and resilient growth of the European financial market.

Data and consumer protection issues raised by new technologies, anti-money laundering challenges posed by new usages, operational risks specific to third party providers and cloud outsourcing, including cyber-risks, competition impacts: the list of issues is quite long! I should also mention the systemic threats that large actors can represent if they use their huge consumer base and leverage on worldwide networks effects without sufficient regard for financial stability consequences.

Facing these changes, Central Banks and Supervisors need to adopt the right mindset. In my view, they should not take the current regulatory framework for granted and operate under the assumption that this framework, which was mainly designed before the technological « disruptions » we see currently spreading through the financial system, does not need to evolve. On the contrary, to continue delivering well on their financial stability mandate, through their three classical roles, namely as catalyst, supervisor and service provider, they should aim first at promoting the necessary regulatory adjustments so that the ultimate goal of financial stability is well preserved. In other words, we should contribute to providing the market with a sound, adapted and updated regulatory framework, which is, in my opinion, needed to support innovation, and even to foster it.

To deliver on such a contribution, an open-minded approach and an in-depth understanding of innovation is required. To that end, we need to engage with innovators, observe the ecosystem, test and learn.

Llet me underline that technological innovations create opportunities and risks, and therefore challenges, not only for financial intermediares but also for public authorities. Central Bankers and Supervisors can and should contribute to meet those challenges. To that end, we should have an open-minded approach and develop an in-depth understanding of innovations currently spreading through the financial sector. This is critical for our capacity to help delivering a sound, adapted and updated regulatory framework supporting innovation, mitigating adequately their inherent risks. This is also critical for our capacity to adapt the performance of the different roles we play to fulfil our financial stability mandate.

Full speech

© BIS - Bank for International Settlements