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The current context is one of increased uncertainty, which is already weighing on growth at the international level. Two threats are contributing to this: above all, trade tensions coming from the US, and second - of course - Brexit.
Brexit is and remains bad news, not only for the United Kingdom, but also for Europe. At this stage, both the British and Europeans are faced with great uncertainty surrounding the outcome. There is still hope for a deal, but there is need to be ready for a no-deal and all the risks it entails. Supervisors both at national and European levels have encouraged and monitored the implementation of contingency plans by the financial industry.
Regarding shared common challenges Mr Villeroy de Galhau says: “Digitalisation is shaking up the way we live and consume, opening up a world of possibilities for corporates and customers alike. Worldwide, it clearly represents both an opportunity and a challenge for banks, as well as for supervisors.”
New players are becoming increasingly important. Fintechs do not have the capital resources to disrupt incumbent banks and can even be acquired by them. By contrast, Bigtechs do have the potential to fundamentally redefine financial intermediation: they have strong brand recognition, a worldwide customer base and privileged access to cutting-edge technologies. This new situation is a major challenge for regulators and supervisors. Of course, financial regulation should remain technologically neutral: the basic principle "same activity, same rules" must apply. This is a good thing for the level playing field. However, beyond traditional financial regulation, international cooperation should be developed in four areas, four cornerstones of the regulation of digital finance:
"Stable coin" projects, including Facebook's Libra, are a case in point. "Stable coins" are quite different from speculative assets like Bitcoins. However, regulators will have to keep a very close eye at the global level.
He then turns to green finance. For him, it is "a new frontier for the 21st Century". There is growing awareness from central banks, supervisors and financial institutions about climate-related risks. Clearly, green finance and climate risks management have gone from the "nice to have" to the "must have", from emotion to reason.
In financial institutions, climate change is no longer confined to Corporate Social responsibility (CSR) policy. Concerning central banks and supervisors, the creation of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in Paris in December 2017 has been a decisive step forward. In 18 months, this coalition of the willing has increased from 8 founding members to almost 50 members and observers from all 5 continents,
This momentum has an important meaning: supervisors and central bankers have collectively acknowledged that climate change-related risks are a source of long-term financial risk. In April 2019, the NGFS published its first comprehensive report issuing four recommendations for central banks and supervisors, and two additional recommendations for policy makers.
Looking down the road, Mr Villeroy de Galhau sees three priorities for the near future: