effects – that ’ s something that financial supervisors know only too well based on the experience of the past 20 years. digital financial technologies are certainly no exception. whenever humans innovate, errors and unwelcome developments are possible, if not to say highly probable. the financial system is particularly vulnerable ; rogue innovation can have severe consequences for society. there are therefore notable voices asserting that information technology will be at the core of a forthcoming financial crisis. greg medcraft, chair of the board of the international organization of securities commissions ( iosco ), has predicted that the next roland berger ( 2015 ), digital revolution in retail banking. bearingpoint ( 2015 ), 7 digital questions for banks. g - data ( 2015 ), mobile malware report q2 / 2015. bis central bankers ’ speeches big financial shock will come from cyber space following a succession of attacks on financial players. to be frank : i share this view. so the wave of digitalisation can wash us up on all sorts of coasts. this means banks and supervisors need to set about charting the right route without delay. one thing i wish to state upfront : i do not believe that full digitalisation is the right destination for everyone : instead, we need to strike the right balance and seek out the right overall package which will convince society over the long term. in the following, i would like to outline what i think banks and savings banks need to do in order to survive in a digital world, and i will address the new challenges i believe regulators and supervisors of this industry will be facing. 2. banks : finding their feet in the digital world banks can no longer discount digitalisation as just one of many trends they can simply sit out. pressure is being created not only by new expectations among customers and within the industry, but also by the influx of new competitors from other industries. having a large skyscraper and a branch network is simply no longer what it is needed to be taken seriously as a legitimate financial services provider and to be able to provide services nationwide. fintechs, as they are known, symbolise the attack of the “ small and quick ”. these are hi - tech financial services firms which mostly provide just a limited range of services but are highly innovative and show huge competitive potential. banks need to acknowledge fintech companies ’ great innovative power without envy. these new players have come up with all sorts of ideas : loan brokerage platforms, for instance, bring together loan - seekers and investors – through this digital

##banken refocus on the core business. total assets are to be reduced overall, riskweighted assets are to be scaled back and certain participating interests as well as non - core activities are to be sold. to that extent, current developments reflect progress in consolidation, which is most readily apparent where the european commission has made government rescues subject to requirements as part of the eu state aid procedures. other adjustments are still outstanding. as we see it, the parts that are sustainable finally have to be put together so as to create enduringly viable institutions. we must be able to perceive whatever holds the future landesbanken world together in its inmost folds. the fact that some institutions did not seize the opportunity to apply for additional capital from financial market stabilisation fund ( soffin ) by the end of last year in order to equip themselves for restructuring is regrettable given the necessary adjustments to the new capital requirements and is, unfortunately, a continuation of the tradition of deferring or failing to implement adjustments that are needed. since the beginning of this year, federal funds have generally been available only from the restructuring fund under the conditions imposed by the restructuring administration. such a regime would certainly not be a “ walk in the park ” for those concerned. the restructuring act ( restrukturierungsgesetz ) nevertheless provides the opportunity to protect the systemic parts of an institution without escalating the “ too big to fail ” problem. it helps to prevent contagion and, at the same time, strengthens the responsibility of the owners and / or supporting organisations. both aspects are of crucial importance for financial stability. with regard to the second pillar of resilience – profitability – the banking sector as a whole can be divided into “ winners ” and “ losers ”. overall, commission business at the big german banks has benefited from a growing demand for banking services, but even here there are differences. those banks whose room for manoeuvre was limited by balance sheet shrinkage and restructuring saw a fall in their net commission income, one reason being that higher commission had to be paid for guarantees provided. interest business as a whole has been a major pillar of income since the outbreak of the financial crisis. lower short - term interest rates have helped in this respect. in the case of landesbanken, it supported net interest income in the third quarter of last year. with regard to the trading results, particular attention should be paid to how many risks have been