In particular, as earlier mentioned, banks should harness the new technologies 7  to achieve efficiency gains. Naturally, that may require some large initial outlays, which could be difficult to achieve in an environment where banking sector revenues remain relatively subdued. But those institutions that fail to adopt the new technologies will find it harder to compete with their more technologically advanced peers. That said, new technological developments pose a significant challenge for financial stability. A recent study on the cost of cybercrime, based on more than 2,600 interviews to senior security professionals at 355 organisations, shows that cybercrime is increasing in scale and complexity.1 Accordingly, the costs associated with these attacks are rapidly rising and the banking industry is particularly affected. In light of this evidence, it should come as no surprise that surveys aimed at identifying the main risks to financial stability have consistently placed cyber-risks at the top, as you can see in the right-hand chart. Paradoxically, the best way to address these risks emanating from new technologies (and also many other operational risks) is to further invest in technology. New technologies come hand-in-hand with new players and new instruments. In terms of new players, the appearance of the so-called Bigtech and Fintech companies represents a new and strong source of competition for traditional banks. While competition is welcome, regulators should ensure all market participants compete on a level playing field and that any harmful regulatory arbitrage is minimised.

In addition, while the level of vulnerabilities associated with banks remains well below that seen prior to the global financial crisis, some segments of the non-bank financial sector exhibit particularly high levels, similar in fact to those witnessed before the crisis. Some of these vulnerabilities may be traced back to the low-for-long interest rate environment, which could be encouraging excessive risk-taking behaviour by some financial intermediaries not subject to the strict prudential requirements of banks in a relentless search for yield. As a reflection of this pattern, in several advanced economies asset valuations appear stretched in key financial markets such as those for equity and high-yield debt, as well as in property markets. The same search for yield may also have fostered an increase in leverage among relatively risky firms. As such, in recent years there has been a swift increase in the volume of lowerrated investment-grade corporate debt; this debt is vulnerable to downgrades and hence the loss of investment grade status in the face of an economic downturn. Recent years have also witnessed a dramatic increase in the issuance of collateralised loan obligations (CLOs). In this regard, there are growing concerns about the quality of the leveraged loans (i.e. loans to highly leveraged firms) that are pooled into these securities, an issue that is particularly relevant for their lower tranches. Against this background, any negative surprise in terms of the macroeconomy or monetary policy expectations could have a sizable impact on market valuations and, more broadly, on global financial stability.