sabine lautenschlager : interview with politico interview by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the european central bank, with politico, conducted by politico on 14 january 2019 and published on 17 january 2019. * * * are we heading for a clash between regulators and banks? no, i don ’ t believe so. firstly, the kind of increases in capital requirements you will see are an improvement of the rules in regards to risk sensitivity, which are very bank specific, depending on their business model. it is not an average increase of capital for all banks, as such. second, the basel implementation is spread over nine years until 2027 — nine years! are banks overplaying this? i think that most of them are overplaying it. you always need to look at whether risk sensitivities are considered adequately. but that is up to the supervisor. the rules in basel are general abstract rules. former ecb executive board member vitor constancio warned against the risks of shadow banking, and luis de guindos has continued along that line … i fully agree with him. as banks are regulated more strongly, some business has become much costlier for them to take on. a lot of business moved over into the shadow banking sector, which is interlinked to the banking sector. this is why this sector is so important to look at, not as a banking supervisor, but from a financial stability point of view. for me, the first step would be to ensure that you have much more knowledge about a sector that is growing and increasing in importance. they influence liquidity in some asset classes in the market and might thus have strong implications for financial stability. how do we do that? stronger disclosure rules? i would first like to know what is the exposure, what is the risk, what are the interconnections in the sector. then i ’ d ask myself, do we need more rules? so, more reporting, yes. a different way of reporting. because the current setup is insufficient? yes, it is insufficient. somebody has to look into it. if these are global players, perhaps the global standard setters should look at it. and not only in a static way. the mistake you should never do is only to look at what you have in your balance sheet. you also need to look at the flows in

financial loss, personal privacy and a clear overview of spending are crucial features that households expect from payment instruments. cash scores favourably in all of these areas, according to our surveys. my interpretation of these results : german households value independence – and physical cash offers three unique forms of independence, which distinguishes it from digital payment systems. first, independence from one ’ s socio - economic background. • cash is tactile and does not require any technical equipment. the use of cash is easily understood across the generational divide. it is this haptic nature of cash, which, in my view, is an important element of strengthening financial inclusion. • ensuring access to cash may be particularly relevant in rural areas with insufficient banking or technological infrastructures. cash is, in that sense, also a means of safeguarding social cohesion. second, independence from technological ecosystems. • given the still fragmented payments landscape in europe, cash currently remains the one truly universal means of payment when it comes to p2p transactions in the euro area. • fintech companies are shaking up the traditional banking system in europe. these companies can often leverage their global reach and huge customer base. this may bring benefits for consumers, for instance regarding cross - border payments. but it also means that customers are becoming locked into particular payment ecosystems. cash offers an easy way out, at least for certain transactions. third, independence from social control and data collection. • as legal tender, cash is fully backed by the domestic central bank. • cash is the obvious choice of payment method when it comes to personal privacy. this strengthens individual freedom. at the end of the day, digital payment systems work by using personal data. collecting data is not harmful per se. but in the age of big data, collecting detailed data means obtaining valuable information which, in turn, makes it possible to construct patterns of individual behaviour. • from a consumer protection point of view, the question arises as to how much information is necessary to carry out a particular transaction. • from an economic point of view, personal data may be seen as an additional source of transaction costs to be factored in when comparing the underlying cost structures of different payment methods. 3 retailing – the source of future transformations? ladies and gentlemen, payment methods tend to evolve in stages. for example, the adoption of mobile payment solutions is typically preceded by the widespread use of credit and debit cards. this is the case in germany, where contactless payments have just started to catch on.