” – which look set to profoundly reshape the structure of financial intermediation. fintech now spreads across financial market segments and along the value chain. it is present, albeit still at an early stage, in payments, credit provision, investment and financial advice, insurance. it runs from front office to back office. and fintech innovations are increasingly cascading into new areas. for example, the development of instant payments infrastructures has helped develop new markets for mobile p2p, e - commerce or point - of - sale payment solutions, which may become a new standard of payments in some areas. on the face of it, i have no doubt that this is a positive development for the financial sector. it leads to greater efficiency, better products and lower prices for consumers. it also has the potential to support financial inclusion. in short, fintech can be part of the answer to the fundamental questions facing our economies : lack of productivity and rising inequalities. that is why regulation is generally supporting opening up market access by introducing legal certainty to previously unregulated services. for example, the revised payment services directive is expanding the list of activities that payment service providers can carry out to include the initiation of payments and account information services. where the uncertainty comes in, however, is how this will affect incumbents. see opinion of the european banking authority on the interaction of pillar 1, pillar 2 and combined buffer requirements and restrictions on distributions. see ssm srep methodology booklet. see ecb ( 2015 ). opinion of the european central bank of 2 september 2015 on bank resolution ( con / 2015 / 31 ). bis central bankers ’ speeches fintech presents an opportunity for new start - ups to compete with established financial institutions in specific financial services, but without the costs of legacy it systems and a compliance - oriented business culture. fintech also opens the market for “ bigtech ” firms such as apple, google and amazon, which have an in - built advantage in digital technology. this threatens to take business away from banks which traditionally offered a package of services, potentially weakening their business models. what is more, over the longer - term technological innovations, such as distributed ledger technologies ( dlts ), could have profound impacts on financial intermediation. dlts have the potential to substantially reduce reconciliation costs for market participants, to disintermediate incumbents in the financial value chain, and to allow for a more efficient use of collateral. through decentralised update

, however, we need to remove any remnants of the regulatory framework that implicitly support home bias. for example, how much national discretion is allowed in implementing rules ; how fungible are liquidity and capital across borders ; how regulations affect the choice of subsidiaries versus branches – all these issues will crucially shape the incentives of banks to become european. and if we do not get them right, the risk is that consolidation ultimately happens through the more painful route of resolution. see d. nouy ( 2016 ), “ risks and resilience – the european banking sector in 2016 ”, speech at the deutsche bank – bank capital forum, london, 23 february 2016. see ecb report on financial structures, october 2015. the herfindahl - hirschman index ( hhi ) is defined as the sum of the squares of the market shares of all firms within the industry, where the market shares are expressed as fractions. as a general rule, an hhi below 1, 000 signals low concentration, while an index above 1, 800 signals high concentration. for values between 1, 000 and 1, 800, an industry is considered to be moderately concentrated. the range of the index lies between 0 and 10 000. see b. cœure ( 2014 ), “ on the optimal size of the financial sector ”, speech at the ecb conference on the optimal size of the financial sector, frankfurt, 2 september. bis central bankers ’ speeches regulatory environment this brings me to the second part of my remarks : the regulatory environment. clearly, the european financial sector is facing a profoundly changed regulatory environment after the crisis. that applies to quantity and quality of capital, to leverage, to funding profiles, to bail - inable debt, to risk management practices. derivatives markets and market infrastructures have also been subject to a comprehensive reform agenda. is this regulation a source of uncertainty? taking a longer - term view, i find it difficult to believe so. thanks to regulatory initiatives, capital ratios for euro area banks have risen from around 8 % in 2008 to close to 14 % today. leverage ratios have improved in most countries. and funding has become more stable : median loan - to - deposit ratios have fallen from more than 140 % in 2008 to around 110 % now. forcing over - the - counter ( otc ) derivatives onto central clearing has also netted out counterparty risk and reduced uncertainty over who owns what in a crisis. all this contributes to a more robust financial sector that is better