jurisdictions’  •  The United States and a number of Asian countries – including Singapore, Hong Kong, China and Japan were assessed to be compliant or largely compliant in their implementation of the Basel III capital standards. •  The European Union was, however, found to be materially non-compliant. •  As home to several of the largest global banks as well as important international financial centres, it is crucial that the EU shows leadership in ensuring more complete and consistent implementation of global banking rules. Regulatory reforms have generally been effective The regulatory reforms have been largely effective in meeting their intended outcomes. First, banks have become stronger. •  Banks are holding more and better quality capital. − Between 2009 and 2014, large, internationally active banks have doubled their average CET1 ratio from just under 6% to more than 11%. •  2  Banks are holding more liquid assets and have reduced leverage levels. BIS central bankers’ speeches  − Since the crisis, the average liquidity coverage ratio for large, internationally active banks has risen from about 80% to more than 120%. − Leverage has fallen from around 22 times of equity to about 16 times. Second, banks have become more resilient. •  Banking business faces serious challenges on several fronts. − The prolonged low growth, low interest rate environment has pressured net interest income. − Bouts of financial market volatility amidst a general contraction in market liquidity has increased the risks facing banks.

There is an overall consensus that digitalisation can potentially boost firms’ productivity through several channels. First, technical progress in the production of digital products leads to new, better and cheaper products generating productivity gains in the sectors producing these products. Second, other sectors may benefit from cheaper inputs encouraging a higher use of those inputs as investment goods, resulting in productivity gains for the firms in these sectors. Third, digital technologies enhance product and process innovations leading to new production and organisational processes, new business models and new or superior products. Finally, information and communication technologies (ICT) are seen as reducing the cost of sharing and acquiring knowledge, potentially increasing the diffusion of innovation and new knowledge. However, digitalisation may also entail some challenges. First, while some argue that digitalisation leads to more intense competition, others fear increasing market concentration in some sectors on the back of digitalisation2. Second, some studies find evidence that ICT and automation are related to labour market polarisation3, where mid-skilled jobs either lose value or disappear, while there is an increase in demand for high-skilled job-profiles linked to digital technologies. This can lead to more income inequality or at least to big transition  1  Goldfard, Avi and Catherine Tucker (2019). “Digital Economics”, Journal of Economic Literature, vol 57(1), pages 3-43 OECD (2018): “Maintaining competitive conditions in the era of digitalisation”. OECD report to G-20 Finance Ministers and Central Bank Governors. 3 Michaels, G., Natraj, A. and Van Reenen, J. (2014): “Has ICT Polarized Skill Demand?