managers in leading banks worldwide have at their disposal a constantly evolving array of databases, software, credit risk models, and risk rating systems, all of which provide supplemental empirical insight into a risk once not readily quantified. and all of these new tools were initially developed or refined to promote a bank ’ s competitiveness and protect it against loss - and not just to respond to a regulatory mandate. nonetheless, the committee is seeking a balance between complexity and risk - sensitivity. when a complex rule fails to add much to the new accord ’ s measures of risk, the committee has worked to remove it. most recently, for example, we announced in our madrid press release that we will simplify the proposals for securitisation exposures. at the same time, the industry has asked that the committee not sacrifice risk sensitivity where it makes sense. the new accord is a complex document partly because some banks felt disadvantaged under a simpler rule and wanted rules that were more comparable to their situations. they asked us to adopt more options for addressing the risks unique to a particular business or activity which, in some cases, required some complicated considerations. if you read just a few of the comment letters on our website, you will see that many of the latest suggestions from the industry would tend to increase the complexity of the new accord even further. still, we know that it is easier to enforce a simpler rule than a complicated one. as we complete the text of the new rules, we will continue to simplify and streamline the framework. conservatism and the balance between soundness and conservatism a second issue that respondents to the proposals have raised is the sense that the new accord may be highly conservative in its assumptions about how much risk exists in certain exposures. questions about conservatism matter to us because we are trying to align capital more closely to risk and in a way that is conceptually sound. a good example would be the treatment of retail exposures, including the small and medium enterprises that fall into this category, where the committee found persuasive economic evidence to support a significantly lower requirement compared to earlier drafts of the new rules. another example we are evaluating currently concerns the treatment of credit losses for banks adopting one of the more sophisticated approaches to credit risk, the “ internal ratings - based ” or “ irb ” approach. our current rules for the irb approach derived capital charges on mathematical estimates of a bank ’ s credit losses - both those that could be anticipated

one hand, central banks need to boost their understanding of the changes that the industry is now experiencing and how these are likely to impact its present and future structure, and also to identify potential sources of risk for financial stability. enhancing stakeholder engagement appears to be a cornerstone for achieving this objective. furthermore, they must be ready to move ahead in deploying tailored, swift and proportionate responses as needed. a very good example of this is the work that both the bcbs and the fsb are steering in terms of assessing the vulnerabilities of crypto - assets and the potential practical strategies to address them in a cohesive way across borders. in addition, financial authorities may wish to show greater ambition and explore how emerging technology can help enhance the way they fulfil their supervisory, oversight or market conduct tasks, to name just a few. in other words, we should be ready to review our ways of working to the extent of contemplating changes in organisational structures. again, let me refer to a case in point in the area that i am best acquainted with : the ecb ’ s single supervisory mechanism ’ s ( ssm ) suptech agenda. this particular strategy rests on four key building blocks, namely : ( i ) implementing an innovation model based on open collaboration, ( ii ) fostering a shared digital culture among its staff, ( iii ) cultivating an innovation ecosystem that connects stakeholders from within the ssm with start - ups, academia and other institutions, and ( iv ) developing impactful tools and solutions. lastly, central banks may want to take the opportunity to try out new resources such as regulatory sandboxes and innovation hubs and to assess their actual ability to foster the development of new ideas, so as to help move them closer to fruition. similarly, central banks must upgrade the infrastructures and services that they themselves provide since these may constrain the type and depth of privately - led innovation that can take place, and will also having a bearing on overall competitiveness and competition across the industry. central bank digital currencies are, perhaps, the most visible illustration of this trend but there are others such as the growing interest in exploring blockchain - based solutions for the settlement of payments and securities and the discussions regarding the issuance of a digital identity. for a deeper insight into these topics, please see fsb ( 2019 ) “ third - party dependencies in cloud services considerations on financial stability implications ”, december. see, eba (