To ensure a smooth transmission of monetary policy to the real economy, it is therefore crucial that money market rates are well-aligned with central banks’ policy intentions. [4] In the first part of my remarks today, I will briefly describe the major longer-term trends in euro area money markets. In the second part, I will focus on monetary policy transmission through money markets and its key determinants. I will devote particular attention to money market functioning during the coronavirus (COVID-19) pandemic. This will allow me to contrast recent developments in money market activity with previous crisis episodes, including the global financial crisis and the sovereign debt crisis. Longer-term trends in euro area money markets Let me start by illustrating several longer-term trends in euro area money markets and their underlying drivers. Three key factors have shaped the trends in money markets since the global financial crisis: a heightened awareness of counterparty risk, a sharp increase in excess liquidity and regulatory reforms. The shift towards secured and centrally cleared transactions Perhaps the most striking trend is the shift away from unsecured transactions towards transactions secured by collateral (left-hand side of Slide 1). The shift towards the secured (repo) market began with https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp201123~8d9573b1b1.en.html  1/7  24/11/2020  Shifting tides in euro area money markets: from the global financial crisis to the COVID-19 pandemic  the financial and sovereign debt crises and was driven by heightened financial market stress and the significant counterparty risk it exposed for unsecured money market transactions.

Through this CDI project, we expect to enhance financial inclusion of SMEs in our 2/3  BIS central bankers' speeches  banking system, and as a result, more efficient financial intermediation. Use of Innovative Technology to Support Supervision 14. Of course, wider adoption of new technologies by financial institutions is in itself presenting considerable challenges to central banks and regulators. The range of technologies deployed by incumbent banks and virtual banks spans different areas – from remote onboarding to funds transfer; and wealth management to regtech, robo-advisory and backend operations, and many more. Seeing early signs of payoff, banks have also invested more heavily in technologies, such as in blockchain and artificial intelligence, to enhance their digital capabilities. 15. As our regulatees become more sophisticated in their technology application, central banks and regulators are also enhancing our supervisory and surveillance capabilities, such as making better use of technology and data analytics; and implementing internal digital transformation to better equip ourselves in the digital era. If we are able to leverage technologies to enhance our vigilance in risk monitoring and management in real time, the resilience and stability of the broader financial system could be improved. 16. We in the HKMA are no different, and are now on a multi-year digitalization journey. This is a huge undertaking, as it involves not only substantial financial investment, but also human resources inputs at all levels. More importantly, if we were to fully reap the benefits of digitalization, many long established processes would have to be changed or even abolished.