the financial sector i am struck by the conflicting forces at work in reshaping the structure of the financial sector. in one direction, economies of scale and scope may result in a higher degree of consolidation across financial services providers. for the banking sector, this would reverse the retreat to domestic markets that followed the onset of the financial crisis in 2007 / 2008. in addition to the scalability of successful new technologies, another factor that supports consolidation are the significant fixed costs in meeting contemporary international regulatory requirements. whether the next wave of consolidation requires cross - border m & a activity is bis central bankers ’ speeches questionable, since the need to acquire national franchises to operate on a cross - border basis has been significantly reduced by freedom of services legislation, the move to a single supervisory mechanism for banks in the euro area and the increasing harmonisation of regulations for non - bank financial firms. in the other direction, there are other forces that may lead to increasing fragmentation of in the provision of financial services, with specialist providers increasing the level of competition in individual market segments and threatening the integrated model of universal banking. in particular, it is possible to envisage an increasing role for specialist firms that target particular niche services and cherry pick higher - margin business lines. a third pathway is the development of partnerships between larger incumbents and newer financial technology providers, with such partnerships focusing on complementing existing service offerings and developing entirely new categories of financial services. it is possible for all of these outcomes to occur simultaneously. consolidation may be driven by the bigger players across europe seeking to drive down costs in a continued low - interest environment, moving to a more fee - based business model and competing across borders through freedom of services. at the same time, new entrants may grow by offering niche service offerings, through different and newly - conceived delivery channels. whatever the outcomes, resolution planning is thrown into sharp relief, in view of the potential financial stability risks associated with the failure of larger, established firms and the elevated likelihood of failure for smaller, newly - formed, mono - line enterprises. orderly resolution regimes enable the financial system to absorb the failure of individual firms : especially in a period of innovation, a “ zero failures ” objective is not appropriate. 3. risks this brings me to the myriad associated risks. i will start from a financial stability perspective, where we need to consider the risks to incumbents. an increase in competition in or across these sectors may result in reduced income ( for example, through squeezed margins or reduced fee income )

we have learned that an event like a major earthquake has many unpredictabilities and uncertainties about it, elements that are incident and location - specific, with characteristics that unfold in different ways. and these make it difficult to plan crisis responses in detail. we have learned the same thing about financial crisis, as in the semi - ironic title of the classic reinhart & rogoff book on international economic crises entitled “ this time is different ”. this means institutions need to focus on general preparedness, competency, leadership, delegation powers and resilience, rather than on detailed plans for specific situations which may not repeat themselves. we have also learned that some earthquakes cannot be thought of as a short sharp event, but rather are a rolling set of shocks with a long period of continuing after - quakes. these can cause on - going damage, delay assessment, continue disruption, and slow reconstruction. the impact of ongoing seismic instability on insurance and construction can be very marked. we have seen how earthquake damage is hugely sensitive to magnitude, depth, location and timing of day and week. in 2009 the biggest earthquake in the southern hemisphere occurred in fiordland, 7. 8 on the richter scale. it caused no damage at all. the much smaller february 22 christchurch aftershock was so disastrous, not just because of its vertical acceleration, but its location under christchurch and its timing on a week - day lunchtime. the same sensitivity could apply to wellington. we also know now that structural damage is only part of the story. the february christchurch earthquake showed that soil liquefaction can also cause land damage that is highly problematic for buildings and underground infrastructure. given that most private insurance does not cover this, it presents major problems for rebuild. this is further exacerbated by land - slips. both liquefaction in valleys and reclaimed land, and slips on higher ground could cause major economic complications in wellington. christchurch has also taught us that some sectors are very sensitive to earthquake disruption. for wellington we might assume that certain people - based industries ( like tourism and education ) would be vulnerable, although much office - based services would relocate as necessary once telecommunications and electricity could be resumed. wellington might be expected to be more resilient in that many of the buildings have been built or altered with earthquakes in mind ( e. g. wooden houses with corrugated iron roofs and reinforced chimneys ), or in the case of older commercial buildings, reinforced to meet earthquake standards. these