. we want to be more open about our assessment, but great care has to be taken to avoid a situation where revelations about emerging concerns lead to acceleration of those concerns and becomes a self - fulfilling prophecy. as i look forward and ponder the forces that are shaping the evolution of the global financial system, the fsb is currently grappling with two issues — financial innovation and market fragmentation — that have the potential to profoundly affect financial stability, so let me start there. owing to our forward - looking orientation, the fsb has been actively engaged in monitoring financial innovation for some time. starting a little over five years ago, there was an explosion of 4 / 6 bis central bankers'speeches financial innovation that had a technological component, which we now call fintech. this encompasses peer - to - peer lending, cryptocurrencies like bitcoin, and the use of new techniques like artificial intelligence and machine learning. in 2017, the fsb issued a report on the implications of fintech for financial stability. the report was careful to note the potential benefits of many of these innovations, including the possibility of greater financial inclusion and increased speed of financial transactions. however, the report also drew attention to several supervisory and regulatory issues, including three priorities where international collaboration is critical : managing operational risk from third - party service providers, mitigating cyber risks, and monitoring macrofinancial risks that could emerge as fintech activities increase. 1 more recently, one particular area of fintech has received a lot of attention — stablecoins. these are a type of crypto - asset that attempts to address the volatility of some crypto - assets by tying their value to conventional assets, such as the value of the u. s. dollar or a basket of currencies. while it hasn ’ t been created yet, it is facebook ’ s proposal for a new stablecoin that significantly increased the public ’ s attention to stablecoins. at the fsb, we undertake regular monitoring of the financial stability implications of crypto - assets, and we have had discussions about the regulatory and supervisory approaches to crypto - assets and potential gaps in regulation. the introduction of stablecoins, however, brings a potentially new scale and scope that the financial regulatory community must carefully consider. although there is a small risk to financial stability today, there is no doubt the potential scale of stablecoins and other crypto - assets yet to emerge may pose regulatory challenges. at present, the

that follow from this renewed focus on macroprudential regulation. taking stock of the entire banking sector first, in line with the pivot away from microprudential regulation, we have a renewed focus not only on the health of individual financial firms but on the amount of capital in the entire banking sector. note that the idea of improving the stability of the financial system by regulating individual bank capital has been around for decades. global policymakers began construction of the modern risk - based, bank capital framework in the 1980s, when the aforementioned latin american debt crisis increased concerns that the capital held by large international banks was deteriorating. since then, regulators, such as the board, have continued to have one eye focused on the capital held at individual firms. now, over a decade after the crisis, exercises such as stress testing have caused us to have the other eye focused on and assessing the amount of capital in the entire banking system. considering macroeconomic outcomes in calibrations and impact analyses the second paradigm shift is that regulators have improved their methods of conducting quantitative analysis of regulations. such analysis, including conventional – cost - benefit analysis, traditionally did not take macroeconomic variables like gross - 7domestic product ( gdp ) growth or the unemployment rate. that is no longer the case. since regulators are given the task of maintaining the stability of the system as a whole, they must concern themselves with externalities and spillover effects to the broader economy. at the federal reserve, several regulatory initiatives have exemplified this change in quantitative analysis. at the height of the financial crisis, the federal reserve created the first stress test, the supervisory capital assessment program ( scap ), to estimate potential losses at those banks, if economic and financial conditions worsened. building on scap, the federal reserve moved to the current stress testing assessment — the comprehensive capital analysis and review ( ccar ) — to evaluate whether the largest firms have sufficient capital to absorb potential losses and continue to lend under stressful conditions. in the ccar process, the federal reserve simulates macroeconomic scenarios like a recession in which gdp falls and the unemployment rate rises significantly. in the 2019 stress test cycle, for example, we tested banks against a hypothetical global recession in which the unemployment rate in the united states rose to 10 percent. 4 the stressed banks were required to show that they could continue to meet minimum capital requirements in the face of those hypothetical macroeconomic shocks. aside from ccar, the fsb compiles an annual list of global systemically