that does nothing but sanctioning. i don ’ t know, and i do not have to know, national initiatives in a national context in this respect. on the central bank side we have sanctions at national but also at european level. you ’ re referring to the case of the latvian bank ablv... the latvian subsidiary. i read in the media that the supervisory side of the ecb informed the 2 / 5 bis central bankers'speeches national authorities of what happened and suggested to them to use the tools they have at their disposal. since the way the national tools were used is now the subject of a court case, i cannot comment further on it. let the court decide. the national central bank for its part took its own measures. and they suspended the bank. the ecb did not suspend the whole group [ from monetary policy operations ] until later. the banque centrale du luxembourg ( bcl ) suspended the group before the ecb because they have the possibility to do so at national level. would you have another example? there are some investment funds which ought to provide information and statistics to the national central bank, which then reports to us. but some funds don ’ t do it. we have asked the bcl several times to initiate sanctions because we consider that the local authority has clear knowledge of the matter. i think they are now ready to do it. i would not say centralisation is better per se. sometimes proximity leads to higher efficiency. another topic which is concerning the ecb and national lawmakers is virtual currencies. luxembourg and other countries in the eu are granting more and more importance to virtual currencies, but you seem to be really cautious. what do you see as the biggest potential threats emanating from cryptocurrencies? one should consider various aspects. one is financial stability, the second is consumer protection, the third is investor protection, the fourth is market integrity and the fifth is anti - money laundering. concerns regarding these aspects are especially high in relation to what you call cryptocurrencies. i call them virtual tokens, by the way. they are like the tokens you buy when you go to a casino. studies have shown that 50 % of transactions made using these virtual tokens and 25 % of users are linked to illicit activities. there are four main risks. the first risk is market liquidity. the market is excessively concentrated, with about 96 % of transactions being carried out by

, but not all regions have benefitted equally here in the second district. some portions of upstate new york have benefitted from an influx of technology companies and other industries, while other regions remain challenged due to a lack of population growth. later today we will hear from two of our economists who will share national and regional economic trends. also in the spirit of looking forward, i can share some views on what community bankers can expect from the supervisory process. examiners are keenly focused on emerging trends around funding costs and liquidity risks. bankers consistently share with us the challenge of raising core deposits to fund loan growth. community banks compete not only with other community banks for deposits, but also with credit unions and larger institutions. and, these larger counterparts are actively courting customers through direct mailers and offering competitive rates. data in the second district show cost across most deposit categories have increased with a slight uptick in the higher cost funding sources such as borrowings. data for the largest banks exhibit a comparable trend, but they control a larger market share. i expect another area of focus during the examination process will be interest rate risk and related challenges. bankers have shared with us that customers are demanding higher rates on deposits, yet those same customers are reluctant to pay higher rates on their loans. what is a banker to do in trying to maintain a productive, long - term relationship? we are seeing signs of lower net interest margins ( nim ), where the average nim in the second district is 3. 47 percent compared to the national peer average of 3. 71 percent. examiners will be reviewing initiatives by community bankers to partner with “ fintech ” firms. we know there is competition from non - bank providers who have the capacity to provide automated loan pre - approvals in minutes and loan closings within days after approval. today, you will hear from a panel of your peers on how fintech is changing the way their firms do business, and how they mitigate the risks associated with outsourcing. in my view, new innovations from the fintech space have the potential to fundamentally transform the provision of financial services. as i ’ ve said elsewhere, this disruption brings both opportunity and risks and that need to be managed. 2 a third forward - looking topic is the coming implementation of accounting changes for reserves, known as the “ current expected credit loss ” approach or cecl. one of our colleagues from the board of governors will join us later to address a common question raised by our bankers