22.02.2019  Banking Union: the challenge of going digital and being regulated Presentation of the PwC report Pablo Hernandez de Cos Governor  Let me begin by thanking PwC for their kind invitation to participate in this presentation of the Sixth Report on Banking Union. In recent years these reports have provided us with a detailed analysis of the challenges facing the Spanish financial sector as a result of having to adapt to regulatory changes and to the new institutional arrangements of Banking Union. And this against a background of far-reaching technological change, which has seen the emergence of new players (such as the fintech and the technological giants, the so-called bigtech). These agents are altering the competitive framework in some of the traditional business segments of banks. As on previous occasions, this year’s report is very complete and analyses key questions on new issues relating to regulation, to banking activity and to the environment banks face. Allow me to focus on two specific issues: the tasks outstanding regarding Banking Union and the technological challenge from a regulatory standpoint. These two issues are, moreover, interrelated. To successfully address the transformation imposed by the new competitive environment resulting from technological changes will probably require harnessing the opportunities of scale and specialisation that the integration of European financial markets offers. But to enable this process of integration it will be necessary first to remove the obstacles that continue today to block the way to the creation of Banking Union and the full Capital Markets Union.

Since then, the financial system has developed around a well-managed and capitalized banking sector that is both healthy and competitive. This feature also rules out financial dominance of monetary policy in Chile. The CBC shares normative attributions with a specialized public institution, focusing on the formulation of financial regulations applicable to monetary markets. Chile’s financial system strength has been acclaimed by international credit rating agencies. Moody’s Financial Strength Ranking places Chile’s financial strength close to the top of industrial countries (figure 5). 2  BIS Review 68/2007  Monetary policy framework: Central Bank charter and its objectives Although the road to CBC autonomy began in the mid-1970s, the 1989 Constitutional Law of the CBC specified the Bank’s objectives and granted CBC the necessary instruments to comply with its legal mandate. Since 1989, the CBC is an autonomous, technical institution, governed by the Constitution, with full legal capacity, control of its equity, and of indefinite duration. The constitutional law establishes two objectives for the CBC. The first objective is to preserve the stability of Chile’s currency. This means avoiding loss of purchasing power due to inflation. The latter objective is achieved through ensuring that inflation remains low and stable. The second objective of the CBC is to ensure the normal functioning of domestic and external payments, by safeguarding the financial sector’s primary functions of credit and savings intermediation, provision of payment services, and proper risk allocation by financial markets. CBC’s Constitutional Law prohibits CBC credit to the government.