Further, by requiring banks to raise additional capital if their stressed capital ratios fell below target levels, the SCAP addressed potential first-mover problems associated with banks having to individually decide to address capital shortfalls – though there was considerable concern at the time about how market participants and bank counterparties would view public supervisory assessments indicating that certain banks needed to raise additional capital. In fact, all but one of the banks required to raise new capital were able to do so, some of them in amounts greater than the SCAP requirements, suggesting that the SCAP created a “safe” environment for banks to enhance their capital positions. Following the SCAP, the CCAR program embedded supervisory stress test results into a broader assessment of a bank’s internal capital planning, providing supervisors both the empirical tools and the regulatory authority to limit distributions in the face of deteriorating economic and financial market conditions. After many years of SCAP and CCAR stress tests, the empirical approach embedded in the calculations might feel pre-ordained, but in fact there were many design choices made along the way. These include the focus on regulatory capital ratios, the horizon of the stress test and the calculation of the maximum impact of the stress test within this horizon. It’s helpful to review these design choices in light of the goals of the supervisory stress testing regime and to highlight which banking sector vulnerabilities are well addressed, and not so well addressed, by the tests.

This regulatory tool has considerable potential to foster financial inclusion and it can signal to Fintech industry participants that the regulator is open to innovation. All these issues will be part of the first National Fintech Strategy, as one of our strategic goals in the period ahead. As you can see the agenda is ambitious, but the idea is to react proactively even though the market demand is still modest. While no one can predict the future with certainty, we know one thing for sure – digital transformation is here to stay profoundly changing the way we live and work. Looking forward, I see three main priorities:  3/4  BIS - Central bankers' speeches  First, we should balance between enabling financial innovation on the one hand and addressing challenges to market and financial integrity, consumer protection, and financial stability on the other. Second, close cooperation between regulators is of utmost interest. It includes international cooperation as well, considering that innovations could have cross-border implications. Third, there is a need for strong industry engagement and commitment by all stakeholders to enable efficient implementation of the National Fintech Strategy in practice. Enhancing public-private dialogue (PPD) between regulators and industry participants can enhance mutual understanding of Fintech innovation and risk profiles, their role in financial inclusion, and can help to strengthen compliance with international standards. We can learn and benefit from one another. In this context, dialogue plays a major role, and events like this can help us enhancing the dialog with one another.