gabriel makhlouf : meeting challenges of a changing financial system remarks by mr gabriel makhlouf, governor of the central bank of ireland, at the central bank of ireland financial system conference, dublin, 18 november 2024. * * * failte, good morning and welcome to our financial system conference. today's theme is delivering a well - functioning financial system in a changing economy. we have an excellent group of speakers but i'd like to welcome in particular minister pascal donohue, president of the eurogroup, and pablo hernandez de cos, the former governor of banco de espana, a former colleague at the ecb's governing council and a future colleague as head of the bank for international settlements, the central bankers'central bank as some describe it. in these opening remarks i will briefly discuss the evolution of the global financial system, and how we at the central bank are transforming to meet the changes we are seeing in ireland's financial sector. i'll also look further ahead at some of the changes we are expecting to see and how we are likely to respond. evolution of the financial system allow me for a moment to reflect on some of the change that we have seen in the structure of the financial system through history, from early beginnings to today's digital world. the earliest form of trade was conducted through the barter of goods and services, and slowly evolved into using commodity or representative money. in fact virtual money did not arrive with the digital age but was created around 5000 years ago by the sumerians who developed a financial architecture based on accounting, a legal system and a variable rate of interest. the lydians brought us the concept of physical money through the creation of coins and laid the foundations for modern finance. fast forward a thousand years or so, and medieval times witnessed the emergence of new financial instruments, such as bills of exchange and letters of credit, facilitating long distance trade and reducing the risks associated with transporting large sums of money across both land and sea. the industrial revolution marked a turning point as financial institutions emerged to support a thriving industrial sector. banks, stock markets and insurance companies played important roles in mobilising capital, managing risk and facilitating economic growth. i won't go on. one thing that hasn't changed for some time is that modern ( post - westphalian ) nationstates have also adopted fiat currency systems. and their central banks have become the guardians of stability in the value of money relative to goods and

services, and the use of monetary policy tools to influence economic activity. 1 / 5 bis - central bankers'speeches as technology continues to develop, we are seeing our monetary and financial system also evolve and we all need to be ready for change. meeting the challenge : transforming regulation and supervision now, it's becoming something of a truism to say that the global economy is fragmenting while the world, including countries such as ours, starts to undergo significant economic transitions – in demography, in technology, in climate – while also experiencing a period of unprecedented innovation1. and change isn't just coming ; in some parts of the world it is already here. in the face of a changing ecosystem, central banks, regulators, businesses and consumers all have to adapt, transform and evolve. for our part, we are changing how we work and how our frameworks reflect an increasingly digital world. while this transformation is across the whole of the central bank, i want to point to some of what we've done so far. we have been changing how we engage with innovation in financial services, enabling us to deepen our understanding of innovation, better inform our regulatory approach, better explain to innovative firms what being regulated entails and better embed a regulatory culture in fledgling and fast growing firms. since last year's conference, where we announced a consultation on our approach to innovation engagement, we have successfully launched an innovation sandbox programme. 2 we have already received a substantial number of applications to our combating financial crime sandbox, from across the innovation ecosystem ( from early - stage startups, scaling firms, established financial services firms, and forward - thinking partnerships ). the projects submitted are exploring new technologies and developing innovative methods to tackle financial crime, benefiting both the financial system and consumers. in the coming weeks, we will be announcing the selected participants and we look forward to sharing the insights and learnings that emerge from that work. in addition to our engagement with innovation, we'll continue to modernise our other frameworks. these include our consumer protection code while we work with our european partners on the digital euro and on negotiations regarding the new eu financial data access regulation, among other things. our most comprehensive response to the changing financial system comes in the form of our new supervisory framework. 3 2 / 5 bis - central bankers'speeches this is a direct response to the rapidly - changing and interconnected financial system which we supervise, recognising that we need to change