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.

This means that aspects such as the privacy or protection of information, transparency towards consumers (so they may take informed decisions) and the effective level of competition between providers of specific technological services (take, for example, the use of the cloud) all gain in importance. However, these matters lie outside the typical remit of financial supervisors and thus make it necessary to promote a collaborative climate and more intense cross-disciplinary dialogue. Conclusions By way of conclusion, I would assert that twenty years after the creation of the euro, major headway has been made in equipping EMU with greater stability. However, the architecture of EMU remains incomplete: there is a pressing need to complete Banking Union and make headway on the Capital Markets Union. To do this, we must push through key aspects such as the common European deposit insurance scheme, and deepen financial integration. The internationalisation of the banking business would help bring about greater diversification, weakening thereby the link between sovereign and banking risk. Further, harnessing synergies and economies of scale may contribute to improving profitability. That would provide for the investment needed to enable the ongoing adaptation to the change wrought by the digitalisation of the banking business. Digitalisation promises major benefits, both for consumers (in the form of better and tailored services) and for those financial institutions able to seize this opportunity. Our role as supervisors lies in ensuring a safe and stable transition for the good of all citizens. Thank you. 8/9  9/9