individual institutions and of the entire financial system. if we manage to strengthen financial stability through digital innovation, this could make supervision and central banking more effective and more efficient. 4 central banks ’ digital innovation activities central banks are themselves innovators in the financial system – but we need your imagination. a digital approach to finance is not merely limited to private actors. it extends to the entire financial ecosystem. and central banks are joining in, too. all around the world, we are exploring the risks and benefits of issuing central bank digital currency. the eurosystem is looking into different concepts for a “ digital euro ”. real - time monitoring of the financial system is a fascinating vision for central banks. just recently, at the “ bundesbank innovation challenge ”, 10 start - ups pitched for the most innovative solution for risk monitoring at our institution. innovation needs space – mental space, certainly, but also physical space. we at the 2 / 3 bis central bankers'speeches bundesbank are currently building innowerk, a collaborative workspace in the city centre of frankfurt not only for our staff, but also for the international central bank community. together with banque de france and the european central bank, we are establishing one of nine global bis innovation hubs around the globe. but innowerk will not be limited to the central bank community. we wish to involve the broader ecosystem – with you, players from the start - up scene, experts from academia and any other creative minds. we want to make this a win - win situation in which the bundesbank benefits from technology and creativity from outside, while start - ups become familiar with the world of central banking. it is safe to say that we are not and will not become a fintech. but we are constantly reaching out to the digital finance community. 5 conclusion now, you might be wondering : “ what ’ s in it for me? ” yes, central banks are relevant to digital innovation in finance – my first point. yes, digital innovation can foster financial stability – my second point. and yes, central banks are innovators themselves – my third point. beyond this, i hope you all agree that digitalisation is not just about making money ; it is about making the world a better place, too. for me as a central banker, a better world means a financial system which is sufficiently and sustainably stable. i am convinced that digital innovation will make us better able contain the threats and vulnerabilities in the

of relatively calm global economic 2 / 14 bis - central bankers'speeches developments at the time – which is to say, solid growth, subdued inflation and moderate fluctuations in economic activity. within the euro area, the convergence process continued during this period, with economies becoming more closely intertwined. financing conditions in the member states converged. in particular, for interbank financial transactions, it no longer mattered where in the euro area a bank was domiciled. sovereign bond market yields also converged. hence greece, though already highly indebted at that time, was able to borrow on almost the same terms as germany. in retrospect, these halcyon days are sometimes also referred to as the euro's " honeymoon period ". the honeymoon came to an abrupt end when the crisis in the us real estate market spilled over to the european financial markets in the summer of 2007. it became evident that european banks, too, had used ever more risky securitisations to invest in the infamous subprime loans. subprime loans are mortgage loans to individuals that involve above average levels of risk. when the real estate bubble burst, large numbers of these loans defaulted one after the other. the securitisations into which these loans had been packaged collapsed like a house of cards, tearing gaping holes in banks'balance sheets. the subprime crisis evolved into a global financial crisis and peaked in the autumn of 2008. that was when the us investment bank lehman brothers collapsed. you may still remember the statement given by germany's chancellor angela merkel and the country's finance minister, peer steinbruck, 15 years ago to the day, incidentally. the inflation rate in the euro area had risen to 4 % by the summer of 2008, but fell below zero for the first time ever as a result of the global financial and economic crisis. some euro area countries recovered fairly quickly from the crisis : for example, germany. other countries, meanwhile, took much longer to recover. and the financial markets now took a much more critical view of these countries'structural weaknesses, in the banking system, say, or in terms of government debt. risk premia on these countries'government bonds had already risen during the financial crisis and continued to go up sharply thereafter. this made it increasingly expensive and difficult for the countries concerned to replace maturing government bonds. greece, in particular, but also ireland, portugal, spain and cyprus experienced massive financial problems – though for different reasons. the