. the sovereign debt crisis has, without question, been the euro ’ s biggest test to date. the financial crisis revealed major fiscal and macroeconomic imbalances in some countries. at the same time, it unearthed weaknesses in the fundamental framework of monetary union and its actual implementation. the fact that almost everyone – including us – underestimated the huge challenges created by the increasing complexity and integration of the financial markets is sure to have played an important role in these developments. first and foremost, extensive consolidation and reform measures now need to be implemented in the countries that are experiencing difficulties in order to restore confidence in the stability of public finances, re - establish competitiveness and ensure a healthy national financial system. the first steps towards achieving this have already been taken. in some areas, however, there is a long road ahead. in addition, comprehensive changes must be made to financial market regulation and supervision to make the financial system more resilient. the resolutions expected at the g20 summit in cannes will be another important step towards this objective. bis central bankers ’ speeches moreover – and this is the main focus of my speech here today – the institutional framework for monetary union must be adjusted so as to achieve the right balance between the responsibility of individual countries, liability and monitoring. my greatest concern is the current lack of a coherent outlook in this area. the steps announced, and those already taken, have shifted the balance of the framework in a direction that is not sustainable in the long term. this threatens to substantially harm the public standing of the euro. in principle, i think that there are two economically sustainable approaches to designing a stability - oriented monetary union for the future. the first would be a return to the founding principles of the system agreed in the treaties, which still essentially applies ; this would entail having european rules for national fiscal policy, countries retaining their fundamental fiscal policy independence, applying the no bail - out principle and financial markets disciplining fiscal policy. despite all the comments to the contrary, i still believe that it is possible to successfully stabilise and consolidate this framework. the other approach would be to embark upon a major shift entailing a fundamental change in the federal structure of the eu. this would involve a transfer of national responsibilities, particularly for borrowing and incurring debt, to the eu. i believe that political leaders need to take a prompt decision on which of these two routes to take. the middle road of communitising liability whilst retaining independent national fiscal policies threatens to

incumbent firms, the central bank considers these issues in a number of different ways, working from the top down through the lenses of strategy, governance, oversight, risk management, and so on ; and from the bottom up focusing on the management of the technology itself, and the broader topic of operational resilience. the central bank also aims to keep abreast of the emerging trends brought about by technological innovation so that we can identify, understand and manage the risks these changes present. while today i will speak about financial innovation, digital transformation and disruptive technology, it is important to stress that the rules and principles of regulation and supervision apply to all the firms we regulate, regardless of the technology they deploy. our focus rather, is to ensure that where innovation facilitates new and better solutions, it does so in a framework which does not prevent regulators from meeting their mandates and strategic responsibilities. the central bank ’ s approach to financial innovation the central bank is proactively seeking to understand and anticipate how innovation is changing financial services provision. we consider this from financial stability, monetary policy, payments system, prudential supervision, market conduct and consumer protection perspectives. we need to understand the threats to the sustainability of existing business models, how technology is driving change to them, the business models of potential new entrants and the wider implications for the financial services system and consumers of financial services and products. supervision of existing firms the central bank is responsible for the prudential and conduct regulation and supervision of regulated firms. our prudential supervisors seek, in part, to ensure that regulated firms have sustainable business models and that they are well run, appropriately governed, have effective risk management and control functions and effective cultures. in this way, we can increase the financial resilience of the system and individual firms, a fundamental aspect of protecting consumers. the central bank has significantly enhanced the intensity and intrusiveness of its supervision of it related risk across the financial services sector. identified issues are required to be resolved through risk mitigation programmes and we will continue to issue thematic findings from our work to highlight areas for improvement for all firms so that their foundations are sufficiently strong to effectively manage the technology risks. where necessary we have used our powers to sanction failures and required the use of third parties to help drive improvements. innovation hub2 the central bank of ireland launched its fintech and innovation engagement initiative in 2018. a key feature of this initiative is the central bank ’ s innovation hub, launched in