ignazio visco : milano hub - results of the 2021 call for proposals opening remarks by mr ignazio visco, governor of the bank of italy, at an event marking the conclusion of the first call for proposals by milano hub, milano, 28 february 2022. * * * good afternoon. i am delighted to welcome you to this event marking the conclusion of the first call for proposals by milano hub, the innovation centre through which the bank of italy intends to provide concrete support to digital developments in the financial market. this first call focused on the contribution of artificial intelligence to improving the provision of banking, financial and payment services. the importance of this field is apparent in the many fintech and non - fintech initiatives that rely on technological solutions based on artificial intelligence. we have seen this not only when performing our institutional functions but also through our dialogue with the market within the two other innovation incubators, the fintech channel and the regulatory sandbox. based on some market estimates, investment in artificial intelligence in europe currently amounts to more than $ 20 billion and is set to exceed $ 50 billion in 2025. the banking and manufacturing sectors are among the trendsetters and yet – according to analyses conducted by the european commission and the european investment bank – europe lags behind both the us and china in the development and use of artificial intelligence. artificial intelligence systems allow business processes to be modernized, strengthen risk management processes, and promote the supply of new products. at the same time, they can give rise to new risks that must be carefully monitored. we must, for example, ensure that the mechanical adoption of complex and at times opaque algorithms do not generate distortions and improper uses of data. acknowledging the need for a common legal framework to regulate the use of artificial intelligence, last year the european commission began discussions on its definition. specific provisions on the financial sector are contained in the framework proposal, which will help ensure an increasingly intensive yet balanced use of the applications developed by industry. it is from this fertile and promising new ground that we put out the call for proposals for our hub. the market response has been more than positive with over 40 projects presented by italian and foreign operators. the initiatives, which were submitted to a panel of experts for evaluation, were notable in most cases for their variety, novelty and the wealth of topics explored. this experience has proven that milano hub can be a key forum for interacting with the market and supporting the development of innovative solutions based on approaches that take due

asset management, attenuates the pressure of competition, increases the risk of conflicts of interest, and ultimately limits the growth of the sector and the protection of investors. intermediaries, and especially banks, must make asset management companies independent and permit competition in the distribution of products, so as to reduce the costs borne by investors. as in other fields, market initiatives are to be preferred to legislative measures ; in their absence legislation or regulation will be inevitable. the competitiveness of italian funds also requires a review of their tax treatment. it is important that the current revision of the mechanism for taxing financial income take account of the need for a reasonable degree of uniformity across countries as regards how and when taxes are levied and their level. there is room for increased competition and efficiency in the field of payment services as well. technology now makes it possible to open the market to new participants, such as mobile phone operators and providers of other services. within the sphere of its regulatory responsibilities the bank of italy will introduce the measures needed to permit such developments, while simultaneously ensuring the security of transactions. at european level the creation of a single payments area will require legislative harmonization. the proposals under discussion envisage a new category of specialized european intermediaries that will be able to combine payment transactions with other commercial activities ; supervision will be based on the principle of proportionality and prudential requirements related to the risks. this is a development to be encouraged. the integration of markets and the growing role of transnational intermediaries require the harmonization at european level of the rules governing supervision and a strengthening of cooperation among national authorities. this year will see another review of the lamfalussy process, including its extension to banking and insurance. convergence of supervisory practices is essential for the efficiency of the european capital market. there are still important differences, such as those in the treatment of hybrid instruments in computing regulatory capital, that must be analyzed and removed. the bank of italy will liberalize and simplify the procedures for opening new branches, thereby increasing banks ’ independence in shaping their distribution strategies. what is required of the supervisory authority is not so much rigid regulation as the ability to intervene promptly to facilitate and orientate solutions found independently by the market. in applying the highest standards of risk management, the activity of the bank of italy and that of banks pursue largely similar objectives. prudential rules reinforce, do not replace, the practices of sound bank management. sometimes situations arise in which individual intermedia