michael s barr : managing the promise and risk of financial innovation speech by mr michael s barr, vice chair for supervision of the board of governors of the federal reserve system, at the dc fintech week, washington dc, 12 october 2022. * * * thank you, chris, and thank you for the invitation to speak to you today about the opportunities and risks of innovation. for the purposes of our discussion today, i will be focusing on financial innovation supported by new technologies, or fintech. 1 in the fall of 2017, we managed to get chris to accept an invitation to speak at a fintech conference in ann arbor, so it's about time that i returned the favor. since then, we have continued to see major changes in technologies and the financial services and products they support. in looking over the materials for that conference, however, i'm struck by how the key themes have remained constant over, not only the last five years, but arguably for centuries. financial innovation has always brought promise and risk, and the urgent need to get regulation right. in 1610, when dutch merchants and bankers were otherwise busy creating global finance, a series of destabilizing bank runs also moved them to establish a ban on short - selling. many of the issues we grapple with today are not as new as we think. supporting innovation with appropriate regulation first, let's start with the promise. every day, we all have countless interactions with the financial system - depositing our paychecks, buying groceries, paying rent, borrowing, saving, and insuring against important risks. the promise of fintech is that it can make financial products and services better, faster, cheaper, and more available. financial innovation supported by new technologies can disrupt traditional providers by spurring competition, creating products that better meet customer needs, and extending the reach of financial services and products to those typically underserved. to realize the benefits of innovation, we need to manage relevant risks. we have seen through history that excitement over innovative financial products can lead to a pace of adoption that overwhelms our ability to assess and manage underlying vulnerabilities. as we saw in the lead up to the global financial crisis, innovative financial products can mask emerging risks, resulting in significant harms to businesses and households and ultimately undermining financial stability. these products can leave consumers vulnerable if they are not coupled with meaningful disclosures and basic protections against abusive practices. innovation can lead to disruptions of existing

. in this regard, the contribution that mefmi makes in this region and the quality of training is an efficient responsiveness to demands for technical assistance rendered. one other aspect adding to the positive attributes of mefmi is the essence of mobilizing technical expertise within the region for delivery of the activities. this workshop can bear that testimony. i am informed that the resource persons who will facilitate the discussions are two experts in the area of human resources drawn from nairobi and dar es salaam. for the other capacity building programmes, a cadre of trained mefmi fellows is used as resource persons. i have been informed that some of the participants in this room attended the previous workshop held in kigali, rwanda in 2012. this provides excellent continuation to learning and implementation of best practices shared from these workshops. the executive director, distinguished participants, ladies and gentlemen : allow me now turn to the subject matter of this workshop. i note with satisfaction the approach of the mefmi secretariat in organizing this workshop. i am informed that the workshop will focus on the following objectives : bis central bankers ’ speeches • to share experiences on the key human resource management trends that are changing organizations ; • to expose participants to key strategic issues in human resource management ; • to discuss human resource management ’ s role and alignment as a strategic business partner ; • to learn about issues of ethics in human resource management ; • to strengthen networking amongst peers on the emerging human resource issues confronting the member states. looking at the above objectives, i can see the central theme being strategic human resource management and development. our organizations have not provided enough support for the human resource departments to carry out a strategic role. human resource is the driving force behind our organizations. strategic human resource management and development requires the recognition of heads of human resources as key partners in the management of the organization. there is therefore a need for hr to have a seat at the decision table in order to ensure alignment of hr strategy to the business strategy, this is key for business success and sustainability. judging from the volume of our capacity building activities, i am prompted to note that within the mefmi region, we tend to put a lot of emphasis on strengthening technical capacities in areas such as macroeconomic policy, bank supervision, debt management, among others and not much investment has been put in building capacity of the hr function. the missing link is the aspect of human resources role as a strategic business partner in engaging the rest of the business functions to drive value across