In this respect, earlier experience with contingent instruments suggests two contractual features are likely to be key. First, no discretion on the part of bank management or the authorities about when and how conversion takes place. Such discretion undermined the effectiveness of uncalled capital in the 20th century and hybrids in the 21st. Second, conversion needs to take place well ahead of bankruptcy. Doing so avoids the deadweight costs of default which, for too-big-to-fail institutions, are likely to be too large to be tolerable by the authorities. That is what undermined reserve liability in the 20th century. It is also what risks jeopardising the effectiveness of so-called bail-in debt in the 21st. To satisfy these two conditions, contingent securities would need a trigger which was both early and non-discretionary. That rules out triggers activated on a discretionary basis by the regulator. It should also make us sceptical of triggers based on regulatory ratios, as these embody a great deal of management discretion. The trigger would need also to be set well ahead of default to avoid its deadweight costs. Pulling the trigger needs to be an early health scare for a bank, not the last rites. One trigger satisfying those criteria would be market-based measures of capital adequacy (Haldane (2011), Calomiris and Herring (2011)). Unlike subordinated debt, equity prices did a good job of signalling distress among institutions during the recent crisis, fully six months or more ahead of failure. Chart 9 illustrates this for the set of “crisis” and “no-crisis” banks.

There are many areas in which the industry could benefit from the latest in technology. 1. Firstly, the enhancement of transaction monitoring and reporting system through the use of advanced big data mining and analysis method. The advancement in artificial intelligence and machine learning enables us to collect and analyse data in a way that was not possible before. This allows us to gain new and important insights that will contribute significantly to the prevention of financial crimes. Furthermore, the ability to tap into vast amount of information also helps promote better client management which would encourage wider 1/4  BIS central bankers' speeches  financial inclusion and tailored customer service; 2. Secondly, the use of technology to complement and support the compliance function especially in the area of higher risk. A good example of this is demonstrated through the use of digital verification to overcome challenges surrounding non-face-to-face verification and transaction. Online identification recognition and biometric verification such as facial, voice and fingerprints recognition offer a new layer of security and potential increase in efficiency for the financial sector. Such advanced systems have the potential to strengthen the existing framework and process to minimise fraud and error. It is all too common to view technology as a disruption and a threat to the way we are used to doing things. Nevertheless, when technological change is managed appropriately and its related risks are mitigated, we can turn it into an enabler of progress for the financial industry.