hermann remsperger : the european financial system 2 years after the start of emu - developments and implications for monetary policy speech by prof dr hermann remsperger, member of the directorate of the deutsche bundesbank, at the joint bundesbank / bis conference on “ recent developments in financial systems and the challenges for economic policy ”, held in frankfurt, 28 - 29 september 2000. * * * introduction before i came to the bundesbank two years ago, i had spent almost 20 years with a commercial bank. as far back as the late 1980s and early 1990s my colleagues and i had been wondering what effect european monetary union will eventually have on the financial markets and the banking industry. we came to the conclusion that the introduction of the euro would lead to an increase in banking competition while initiating a process of “ creative destruction ” in the financial markets. at the same time, however, we found it difficult to isolate the specific impact of the euro from the more general factors that influence the financial system. looking back to almost two years of monetary union, i find that the problem of identifying the particular euro factor is still unsolved. sometimes too much is attributed to the euro. if the changes which the euro has brought about in the financial system are to be precisely identified, we also have to make sure that the financial system in the period before monetary union is portrayed in an accurate manner. as far as germany is concerned, i have some doubts about this. above all, there is reason to believe that the dominance of bank loans has been exaggerated and equity financing correspondingly underestimated. the prevailing assumptions concerning the extent to which bank lending superseded equity financing in the past went too far. unfortunately, i cannot provide the relevant data for countries other than germany. in the previous financial flows computations, equity financing of german enterprises was identified exclusively with stock issues. such an approach, however, fails to deal adequately with the german corporate structure. the picture presented by the previous accounting method had to be widened to include participations in private limited companies and partnerships. shares in such firms are now posted in the financial flows account as so - called “ other participating interests ”. when stock issues and other participating interests are added up, the result shows that at the end of 1998 the volume of bank loans to non - financial companies in germany exceeded equity financing by a mere 5. 3 %. please let me add that we are intensively discussing the euro - induced movement from bank loans to corporate

, globalization — that opens the door to these outcomes? there ’ s a lot of good research, including by people in this room, pointing to many possible forces at play. i think three stand out : technology has benefited skilled workers more than other workers because it has made them more productive. people in more - routine jobs have tended to be replaced entirely. digitalization will likely reinforce this dynamic. machine learning and other technologies mean that tasks requiring routine cognitive skills, such as reading medical scans or preparing legal and investment advice, can now be automated too. that said, i do not share the dystopian view of a world without workers. people will still have an absolute advantage in tasks that require common sense and a human touch. and they will also find employment in areas where they have a comparative advantage. the question is not so much whether there will be jobs for people, but, rather, how well they will pay, and what the working arrangements will be. 8 some types of technology lead to market concentration and the rise of “ superstar ” firms. these firms tend to have fewer employees than conventional companies and can earn impressive monopoly profits. 9 market concentration happens quite naturally in industries with prominent network effects and other scale economies. there is nothing new in that. phone companies are traditional examples, and social media companies and online marketplaces are more - modern examples. what is new is that the “ winner - takes - all ” effect is magnified in the digital economy because user data have become another source of monopoly power. data from a large network create a formidable barrier to entry. another barrier to entry can come from firms using their position as gatekeepers to crucial online services to impede their competitors. and, it ’ s easier to avoid taxes when production is not tied to a large factory with a fixed physical location. 10 2 / 7 bis central bankers'speeches technology has helped to separate work into discrete tasks, allowing businesses to make more use of short - term, temporary jobs to maintain flexibility or respond to changing needs. workers in these types of jobs tend to have less bargaining power than regular employees. they usually earn lower incomes, get fewer benefits and have less job security. 11 this may be one reason why we have seen relatively weak wage growth in canada and other g7 countries despite improving labour market conditions. with the current wave of innovation, the “ gig economy ” is likely to keep growing. 12 it doesn ’ t have to be this way we do not have to be hostage to