And in response, the Bank of England had to intervene on financial stability grounds through temporary purchases of long-dated UK government bonds. While these new risks and vulnerabilities are evident, the non-bank financial sector has remained largely stable in recent months, despite the stress in the banking sector that emerged in March. Fund investors shifted their exposure from higher to lower risk assets, especially from high-yield corporate to government bond funds. Portfolio de-risking has also been evident in insurance corporations and pension funds, as higher interest rates have reduced incentives for the non-bank financial sector to search for yield. But there are no grounds for complacency here. Structural vulnerabilities from liquidity mismatches and leverage remain elevated despite recent de-risking. Moreover, bank and non-bank financial institutions can be closely interconnected through funding channels, ownership linkages and common risk exposures. The non-bank financial sector remains particularly exposed to asset price corrections and credit risk should corporate sector fundamentals deteriorate substantially. In addition, non-banks’ exposure to property markets has increased markedly in recent years, rendering institutions vulnerable to ongoing price corrections in real estate markets. Fragile risk sentiment and elevated vulnerabilities in parts of the non-bank financial sector could amplify negative shocks. Strengthening the resilience of non-bank financial intermediation Given the vulnerabilities in the non-bank financial sector, it is vital to further enhance its resilience, also from a systemic perspective. To date, the macroprudential policy framework has mainly focused on the banking sector, while the policy framework for non-bank financial institutions still needs to be enhanced.

Macroprudential authorities should coordinate their actions in order to mitigate these risks and seek ways to balance the protection of customers' interests and financial institution risks with specific policy objectives, a level-playing field being one of them. The initiatives taken by the European Commission, such as the digital finance package, that captures – among others - the proposal for digital operational resilience act (DORA6), and the revision of the second Payment Services Directive, are steps towards mitigating the identified risks. 3/4  BIS - Central bankers' speeches  The increasing number of Cyber-attacks in Europe indicates that a lot more needs to be done. The growth of the Fintech sector has raised the need for regulators to adjust their role within the perimeter of prudential regulation. Extending the perimeter of bank regulation to all financial service providers could possibly constrain financial innovation. But keeping the new entrants completely out of the perimeter will tilt the playing field in their favour and leave consumers unprotected. A balance must be found to allow the regulatory perimeter to cover all activities that have systemic risk potential, while allowing for innovation. Finally, Data protection is important in order to safeguard confidence in the banking sector. As a result, Cyber security should be further enhanced and prioritised and Cyber-risk incidents need to be included in financial institutions' business continuity and disaster recovery plans and be tested frequently. Given the cross-border activities of Fintech and BigTech, authorities across jurisdictions should cooperate in regulating them. THANK YOU.