In addition, we are working very closely with all of the banking supervisors and other key parties to facilitate an effective resolution to the current problems facing the island’s banking sector. Some consolidation is likely needed to produce stronger, healthier institutions more able to make the sound lending decisions that support economic growth. Let me also tell you a bit about how we are contributing “on the ground” here in Puerto Rico. I mentioned financial literacy a few minutes ago. The Federal Reserve System and the New York Fed have taken a great interest in economic education and financial literacy and will continue to do even more in the future. I, personally, believe that financial literacy is essential so that households can make the type of good financial decisions that help to ensure better futures. The New York Fed, along with many financial institutions and foundations in Puerto Rico, has created and supported the Economic and Financial Education Alliance of Puerto Rico. Over the past ten years, the Alliance has trained more than 400 high school teachers in economics and financial literacy. I would like to personally thank all the institutions whose devotion to this Alliance has made these education efforts possible. These teachers take what they learned back to the classroom and many of their students enter the Federal Reserve Economics Competition. The students apply analytical skills to a local problem of their choosing and work as a team to create a presentation outlining their solution and responding to questions.

Macroprudential policy is also concerned with the emerging structural risks described previously. For example, the “platformisation” of financial activities driven by digitalisation is contributing to a profound transformation of financial intermediation – a trend also amplified by other factors: the search for yield in the current low interest rate environment; changes in financial intermediation business models in response to the macrofinancial environment and regulatory developments; the desire of firms to diversify their sources of financing to increase their resilience. With regard to financial stability and systemic risk, these developments mean that non-bank financial intermediation is playing an increasing role in financing the economy, while macroprudential policy has been designed with reference to a bank-centric financial system. The disruption in financial intermediation is also increasing the number and complexity of the interconnections between financial sector participants (banks, investment funds, insurers). In both cases, macroprudential authorities need to strengthen their analytical capabilities, in order to better understand the consequences of these interconnections, eventually conducting stress tests across the entire system rather than just in individual sectors, and adapt their macroprudential policy to the new challenges. The HCSF is fully committed to this goal. Its powers were adjusted by legislators in 2016 to allow it to intervene outside the banking industry. It has also begun carrying out coordinated stress tests across all sectors, and has facilitated the pooling and cross examination of data held by different authorities to provide a more holistic understanding of the system and its interconnections.