fintech developments and emergence of technology - related risks while remaining supportive of financial innovation. some of these regulations have significant impact on correspondent banking. staying competitive in the midst of digital revolution the rapid evolution of digital technology, particularly the widespread use of smart phones at the turn of the new millennium, revolutionized financial product and banking service delivery. customers now have unprecedented access to a wide array of electronic platforms. included in these are virtual financial services platforms, which allow customers to perform banking transactions and make payments anytime, anywhere, and at their own convenience. recognizing that electronic banking expands client reach and improves financial access, as early as 2000, we allowed banks to engage in electronic banking. in parallel, we have implemented a cash agent model. this provides an innovative service delivery channel through combining e - banking self - service online and real - time transactions, with cash - in, cash - out ( cico ) provided by third - party cash agents. emerging digital solutions, products and services, push banks to keep pace with increasing competition posed by even non - bank players. non - bank players offer financial products and services with thoughtfully designed user interfaces. one recent development with significant impact to correspondent banking is the rise of blockchain or distributed ledger technology ( dlt ). 2 / 5 bis central bankers'speeches hence, correspondent banks must embrace this wave of innovation and rethink strategies. to grow markets in the midst of competition, new customer solutions through efficient operations should be delivered. technology - based solution providers suggest that blockchain or dlt could be harnessed to alleviate some correspondent banking issues. this can be achieved by enabling better risk management, reducing costs, and providing an alternative payment platform, especially in terms of transferring small - value payments. in this connection, the bsp is working closely with market innovators and industry players to explore tie - ups of correspondent banks with dlt providers. we believe that collaboration and strengthening partnerships with other fintech players is a way to boost digital capabilities of correspondent banks. we recently approved a project under the test - and - learn approach. the project will facilitate creation of a real - time domestic and overseas remittance corridor without the need to establish a central operator. this will prove beneficial to our remittance sector which relies heavily on correspondent banking for the safe and efficient settlement of transactions. the bankers association of the philippines ( bap ) is also spearheading a project to develop digital ids powered by blockchain technology. establishing a safe

over time by borrowing today, the more so the higher the expected gains in disposable income. a process of gradual real exchange rate appreciation, supported by strong, domestically driven output growth and temporarily accompanied by relatively large current account deficits, would seem fully in line with what the theory of convergence suggests. according to mihaljek, d. and m. klau ( 2008 ), over the period from the mid - 1990s to the first quarter of 2008, the balassa - samuelson effect would explain around 24 % of the cee inflation differentials vis - a - vis the euro area. for more details, see, “ catching - up an inflation in transition economies : the balassa - samuelson effect revisited ”, bis working paper. bis central bankers ’ speeches but in several countries, the process of real convergence proved itself difficultly sustainable. during the period before the global crisis, expectations were overly optimistic, and investors and consumers engaged in economic behaviour that generated excess domestic demand, strong credit growth and inflationary pressures. as in many other markets, risk premia were squeezed, leading to asset price misalignments ( particularly in the housing market ) and over - indebtedness in a context of abundant global liquidity and a strong appetite for risk. foreign direct investment flows often focused on the non - tradable sector, for example, construction and financial sector intermediation. furthermore, foreign currency lending grew rapidly, leading to increasing balance - sheet mismatches. as a result a number of countries experienced notable departures from price stability and wide external imbalances that eroded competitiveness – developments that went over and above what could be justified by “ equilibrium ” catching - up. macroeconomic policies added to the risks. in countries with a fixed exchange rate, independent monetary policy was not available, resulting in monetary policy conditions that became too expansionary. in principle, this could have been compensated by very tight fiscal policy. but with the benefit of hindsight, fiscal policies were often insufficiently restrictive or even loose. the global crisis revealed these weaknesses with particular virulence. when capital flows dried up in late 2008 and trade collapsed, real output declined sharply, in some cases leading to severe recessions. with the main and remarkable exception of poland, the region was severely hit by the crisis. many observers feared then that, if the crisis were allowed to run its course, it could be near catastrophic for the region and extremely dangerous for the european banking system