The challenges facing central banks can be grouped in three areas:   first, what is being labelled as the “new normal” in the macroeconomy and its implications for monetary policy;    second, the challenge for financial regulation policies;    and third, the new challenges posed by financial innovation and the new technologies. The impact of the crisis on monetary policy But before addressing these challenges, I think it might be useful to take a short step back to remember where we have come from. We can only understand today’s challenges if we bear in mind the changes, often far-reaching, that have come about in central banks in response to the crisis. The global financial crisis came about following a build-up of bubbles in the advanced economies, mainly in the financial and real estate sectors, a process to which easy financing conditions proved conducive in a setting in which risks were not appropriately priced. In any event, what was surprising was the intensity and global nature of the crisis that broke in 2008. Given highly integrated financial markets and complex interconnections, instability spread rapidly, leading to the most serious financial crisis since the Second World War. In the European Union the crisis was, moreover, exacerbated by a double-dip recession, which has prolonged the recovery period and has also revealed the weakness of the euro area’s institutional framework. The crisis also left the monetary and regulatory policy “manual” that central banks had been applying in tatters.

The second conditioning factor is the fact that globalised financial markets are a reality, which requires a permanent international coordination effort in the management of financial policies. Coordination is needed to tackle contagion across different markets in jurisdictions and, also, to prevent regulation being distorted by means of regulatory arbitrage, or the competitive lowering of regulatory standards across jurisdictions. Fora such as the Financial Stability Board, the Basel Committee and the European Single Supervisory and Resolution Mechanisms have gained in importance. A third pillar, the European Deposit Insurance Scheme, has still to be defined and remains the subject of political negotiations. The challenges of financial and technological innovation Finally, I shall refer to the challenges posed by financial and technological innovation. Since the year 2000 we have witnessed a proliferation of technological changes that are reshaping the global economy. This started with the Internet, which was only incipient at the turn of the century, followed by electronic trade, mobile phones, artificial intelligence and big data. Technology is introducing new types of services and products, and is challenging the traditional commercial models in all economic sectors. In the case of the financial system, there is considerable scope for improving the efficiency and quality of services through the application of new technological processes. We are seeing how new technologies are being incorporated into traditional functions, for instance in how payments are made, in the automated management of risk pricing and in financial consultancy. The financial sector is adapting to this new reality.