macroeconomic stability in the broad sense. 5 / 8 bis central bankers'speeches the most important regulatory steps taken in europe to make the banking sector more resilient are the creation of the banking union and the development of a new macroprudential framework. it may seem surprising that the development of the banking union only started as late as 2010 – 12, more than a decade after the founding of the euro. today, the banking union makes a lot of sense, and it clearly strengthens the euro area – but regrettably it took a financial and debt crisis to really get the ball rolling. since 2014, the banking union consists of two main building blocks, the single supervisory mechanism ( ssm ) and the single resolution mechanism ( srm ). however, the banking union is not yet complete. a third building block, the european deposit insurance system ( edis ), still needs to be implemented. as for the macroprudential work, in 2010 the european commission proposed a union - level body, with a mandate to oversee systemic risk in the financial system. a year later, the european systemic risk board ( esrb ) was founded and became responsible for the macroprudential oversight of the eu financial system. macroprudential policies are like taking away the punch bowl when the party is at its best. they help prevent the excessive build - up of risk, smoothen the financial cycle, and limit contagion. some of the macroprudential tools are additional capital buffers, others are borrower - based tools, such as loan - to - value ( ltv ) caps. these have proven quite effective in many eu member states, e. g. by calming down the housing markets in ireland, norway and sweden. 6 / 8 bis central bankers'speeches now let me move to the third, and probably biggest challenge of all. how can we transform banking so that it contributes responsibly to an ecologically sustainable, yet growing and employing economy, in the face of climate change? let me be clear, climate change is very relevant for banks. that ’ s because it is the biggest market failure of all times. its impacts are already felt today, in the form of extreme weather events, hurricanes, flooding, and extended heat waves, leading to loss of lives as well as financial damages. climate change is expected to increase their frequency and severity. the negative impact is further amplified by long - term effects, such as rising sea levels, changes

olli rehn : future proofing your bank? digital transformation and regulatory reform in the financial sector closing keynote address by mr olli rehn, governor of the bank of finland, at the financial times middle east banking forum, dubai, uae, 11 november 2018. * * * your excellencies, ladies and gentlemen, many thanks for the invitation to the ft middle east banking forum, which has provided an excellent opportunity for substantive dialogue on the future of banking and finance. my task – both exciting and difficult – in this closing keynote is to discuss what future - proofing of your bank could mean, with the perspective of next 10 years. futurology is often associated mostly with technology. yes, digital technology is quite profoundly changing the operating environment of banks. but it would still be a mistake to think the future is all digital, and nothing else. future - proofing a bank is as much about a sound business model and the ability to adapt to a changing environment, as it is about utilising the best technologies available. as we look at the next ten - year time horizon, there are three major forces challenging banks : digital technology, bank resilience, and climate change. since my experience stems from europe, i refer here to european banks, but this largely applies to banks in general. embracing digital technology is an essential part of future - proofing a bank. the financial industry is going through a major transformation, driven by the whole range of digital technologies and the explosive growth of data. regulators, including central banks, are aiming at finding the right balance between regulation and innovation, so that consumers and businesses can benefit from new possibilities, while maintaining financial stability and a level playing field. we want to make sure society remains inclusive. this requires us to look at digital 1 / 8 bis central bankers'speeches transformation from the citizens ’ point of view. therefore, we have to identify what is real and what is hype. we can divide the developments in three categories : 1. those that clearly increase societal welfare and should be benefitted from, such as mobile and real - time payments – as long as we also take care of enhancing financial literacy ; 2. those that should be watched, or even prevented, such as booms and busts related to crypto - assets ; and 3. those that can be further developed, such as machine learning and artificial intelligence. let me highlight two developments in the european banking sector, which may set an example for the rest of