12  Darracq Paries, M., C. Kok, and D. Rodriguez Palenzuela (2011), “Macroeconomic propagation under different regulatory regimes: evidence from an estimated DSGE model for the euro area”, International Journal of Central Banking, December. See also, Clerc, L., A. Derviz, C. Mendicino, S. Moyen, K. Nikolov, L. Stracca, J. Suarez and A. P. Vardoulakis, (2015), “Capital regulation in a macroeconomic model with three layers of default”, International Journal of Central Banking, June. 13  Gross, M., C. Kok and D. Żochowski, (2016), ”The impact of bank capital on economic activity: Evidence from a Mixed-Cross-Section GVAR model”, ECB Working Paper Series No. 1888, March. 14  Calimani, S., G. Hałaj, D. Żochowski, “Fire-sales in an ABM of banks and shadow banks”, mimeo. 15  Ari, A., C. Kok, M. Darracq Paries and D. Żochowski, (2015), “Shadow banking in general equilibrium”, mimeo, European Central Bank. BIS central bankers’ speeches  5  vulnerabilities in this sector and help assessing the potential for spillover of the stress in that sector to the rest of the financial sector. This brings me to my fourth point. Interaction between banks and the non-financial sectors: a macroprudential stress test framework should integrate, to the extent possible, all sectors of the economy to properly account for vulnerabilities that may emerge from any of them. Chiefly important are the household and corporate sectors. At the ECB, work is well underway with the view to extend the stress testing framework to the household sector 16, using data from the ECB Household Finance and Consumption Survey.

Enabling the FinTech Transformation  We are actively exploring how new financial technologies could support our policy objectives. There are five ways the Bank is enabling the FinTech transformation. The first is widening access to central bank money to non-bank Payments Service Providers, known as PSPs. 3 As the internet revolutionised commerce, making trade faster and markets more competitive, payments technology lagged in many countries, although it is worth remembering that the UK has been a global leader on real-time retail payments. Faster Payments (FPS) was one of the earliest real-time retail systems introduced, in 2008. Now, new entrants and established players are seeking to provide payment services that are instantaneous, secure, reliable and accessible anytime from anywhere. 4 Retail consumers and firms are increasingly demanding payments completed in seconds, not hours or days. They expect payments to be seamless, reliable and cheap whether to recipients overseas or just up the street. And they expect to make payments without visits to a bank branch or even logging onto a desktop computer. Similarly, companies, financial intermediaries and governments want to process ever larger and more complex bulk payments covering multiple systems, countries and currencies. Central banks lie at the hearts of payment systems, giving households and firms the assurance that transactions have settled in the most secure form of payment: central bank money. To fulfil that role, our payments infrastructure needs to remain fit for purpose: reliable, resilient and robust. But we must also be responsive to changing payments demands.