. we certainly must continue monitoring developments closely and adjust regulation when and where needed to ensure that financial services remain safe and sound. but competition – to refer to the austrian economist friedrich august von hayek – is a discovery procedure10, and it is up to the markets ’ verdict which product or service is the optimal solution. legislation and regulation should therefore ensure a level playing field for all market players, incumbent´s and new entrants alike. 1 see arner, d., barberis, j. and buckley, r. ( 2016 ), “ the evolution of fintech : a new post - crisis paradigm? ”, georgetown journal of international law, vol. 47, no 4, pp. 1271 – 1319. 2 overall investment across venture capital, private equity and mergers and acquisitions. see kpmg ( 2018 ), “ global fintech investment soars to record us $ 57b in first half of 2018 : kpmg pulse of fintech report ”. 3 see mersch, y. ( 2018 ), “ tips and the future of innovative retail payment solutions in europe ”, speech at the tips launch event, frascati ( rome ), 30 november. 4 see deutsche bundesbank / ehi retail institute gmbh ( 2019 ), kosten der bargeldzahlung im einzelhandel, february. 5 see claessens et al. ( 2018 ), “ fintech credit markets around the world : size, drivers and policy issues ”, bis quarterly review, september, pp. 29 – 49. 6 see carstens, a. ( 2018 ), “ big tech in finance and new challenges for public policy ”, keynote address at the ft banking summit, london, december. 7 while investors typically cannot redeem claims early, they can choose not to roll over maturing claims. 8 61 % of incumbent institutions indicated that fintechs threated to decrease their revenues in the payment and settlement domain. see european banking authority ( 2018 ), eba report on the impact of fintech on incumbent credit institutions ’ business models, july. 9 see celent ( 2018 ), global tech spending forecast : banking edition, 2018, march. 10 see f. a. hayek ’ s ( 1968 ), “ der wettbewerb als entdeckungsverfahren ”, a 1968 lecture, sponsored by the institut fur weltwirtschaft at the university of kiel. it was published as no

exercise to compute “ normal credit ”, similar to the notion of potential output. the difference between the actual volume of credit and normal credit offers a measure of the “ credit gap ”, analogous to the output gap. not surprisingly, this exercise reveals that in non - stressed economies the credit gap is either insignificant or making a very small contribution to economic slack. in stressed economies, the same measure contributes to up to a third of economic slack. this analysis suggests that credit constraints are putting a brake on the recovery in stressed countries, which adds to disinflationary pressures. you can also see why the heterogeneity becomes a factor in assessing low inflation in the euro area. calibrating the policy response what is the right policy response to these developments? essentially, we are confronting three issues that might warrant a response. first, the common effect of exogenous factors, including the exchange rate, on euro area inflation. second, the asymmetric effect of endogenous developments, such as tight access to credit for parts and sectors of the euro area. and third, the risk that those effects combine to generate a more persistent regime of excessively low inflation. let me elaborate on those three issues. first, to the extent that developments in the exchange rate, money or capital markets result in an unwarranted tightening of monetary and financial conditions, this would require adjustment of our conventional instruments, so as to secure the degree of monetary accommodation intended by the governing council. at the other end of the spectrum would be a too prolonged downward departure of inflation and / or inflation expectations from our projected baseline scenario, for example due to the interaction between exchange rate developments and medium - term inflation expectations as i explained earlier. this would call for a more expansionary stance, which would be the context for a broad - based asset purchase programme. an intermediate situation is one where credit supply constraints interfere with the transmission of monetary policy and impair the effects of our intended monetary stance. this would require targeted measures to help alleviate credit constraints. i would like to dwell shortly on this contingency because it relates to the important question of whether weak credit growth results from low credit demand or supply constraints. weak credit demand in the early stages of an economic recovery is not unusual. credit growth typically lags the recovery by three to four quarters as firms draw down internal funds. but a recovery eventually results in growing credit demand. and at this point, for monetary policy to produce its full effects, there