Central counterparties (CCPs), by concentrating all outstanding derivatives positions of the participating buyers and sellers in one place, enable a significant reduction in counterparty risk: firstly, through the diversification and netting of risk exposures; secondly, through the application of stringent risk-based margining procedures to ensure adequate management; thirdly, through collateralisation of outstanding exposures on at least a daily or even intra-day basis. In addition, CCPs also contribute significantly to market transparency and integrity and bring significant operational efficiency gains, e.g. through the standardisation of risk management processes as well as via multilateral netting and collateral management. 1  Financial Stability Forum, “Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience”, April 2008. BIS Review 74/2009  3  As a result, public authorities and industry bodies worldwide have embraced the establishment of CCPs for CDS markets as a top priority and we expect a number of solutions in both the EU and the United States to be up and running by the end of July 2009. In view of the role of the euro for the derivatives market, I would welcome a CCP in the euro area. The effective and timely implementation of the respective roadmaps and full dealer commitment to making the maximum possible use of these facilities will be essential. Looking ahead, it will also be vital to ensure close convergence between the requirements and approaches of the overseers and regulators involved so as to maintain a level playingfield between the different CCPs and pre-empt possible regulatory arbitrage.

For example, the infusion of big data, artificial intelligence and machine learning allows a better understanding of the varied and specific needs of the different segments especially the unserved and underserved. This enables better customisation of financial solutions and offerings and choice of Shariah contracts as Islamic financial institutions have greater understanding of the risk dimensions and hence more robust decisions. One example is the application of big data analytics on geospatial data to identify flood-prone areas and anticipate financing and protection needs of those in the area. It 1/3  BIS central bankers' speeches  also enables Islamic financial institutions to better deliver the expectations of Shariah as digitalisation allows for greater transparency and traceability of the flows of funds within the system and with the customers. In supporting more vibrant digitalisation of financial services, the Bank will continue to foster an enabling environment for innovation, such as by enhancing pathways for digital innovations to test, learn and exit. The upcoming refresh of our regulatory sandbox will provide a greater boost to support industry players in bringing financial innovations safely to the market, across different stages of the innovation cycle. We recognise that solution development is not the only way to deliver impact. This leads me to my second point – embracing transformative change. A whole-of-organisation effort to instil total change of institutional behaviour and culture.