3  Potential vulnerabilities to geopolitical risks also arise from an overreliance of EU participants on non-EU players in financial market infrastructures and digital financial services. This includes the dominant position of non-EU payment-related service providers in intermediating European payment transactions, the overreliance of EU market participants on third-country clearing services, and the rapid rise of non-EU “Big Tech” firms and the complexity of the crypto-ecosystem, which is dominated by a few large cryptoasset service providers (e.g. exchanges) often located outside the EU. In short, the EU - like many other economies around the world, including the UK - faces a number of external trade and financial vulnerabilities related to its high integration into global value chains and high dependence on certain imports, exports and non-domestic financial market infrastructures. New globalisation trends In the midst of numerous and strong geopolitical shocks, governments and firms are trying to reduce these vulnerabilities. It is obviously too early to know how and to what extent these attempts will affect globalisation trends, but they seem to be shifting from “dependence to diversification, from efficiency to security and from globalisation to regionalisation”. 8 First, companies are reducing their dependence on certain suppliers - i.e. seeking greater diversification - which can be very useful in reducing the impact of global supply shocks. Thus, according to some surveys, by the end of 2021 almost half of the companies had diversified their supplier base compared with only 5% that had implemented measures to return production to the company’s home country.

I would define private sector involvement (PSI), for the purpose of this discussion, as intentional efforts and contributions, formal or informal, undertaken in a context of sovereign financial distress. This support ranges from softer forms, such as preventive talks, to harder forms, such as debt rescheduling, restructurings, reprofiling or even debt write-downs.1 2 In the remainder of my talk, I will look mainly at the harder forms of PSI, often called debt restructurings. 1 2  See Enderlein, Müller, and Trebesch, 2006. Soft forms of private sector involvement include those that would not change the terms and conditions of the bonds or loans. Such forms may include voluntary roll-over agreements and preventive talks and meetings. By contrast, harder forms of private sector involvements imply changes to the terms and conditions of the bonds or loans. Under some forms, the private sector participants may face a net present value loss, in other cases they would not face such a loss. BIS central bankers’ speeches  1  The basic rationale behind involving private creditors when a debtor is in distress is straightforward and uncontroversial: creditors and investors should bear the consequences of their decisions as fully as possible and should not rely on taxpayers’ money to be bailed out.3 The underlying reason has long existed: a bailout by taxpayers today may encourage risky lending by private investors in the future. In the corporate sector, it is actually commonplace to apply such principles.