denis beau : the digitalisation of the financial sector - new challenges, new levers closing speech by mr denis beau, first deputy governor of the bank of france, at the 4th assises des technologies financieres, 30 september 2021. * * * ladies and gentlemen, i would first like to thank the president, eric woerth, for inviting me to close these 4th assises des technologies financieres, and to provide my insight, as a central banker and supervisor, into the challenges posed by the digitalisation of financial services. in the framework of our mission to safeguard monetary and financial stability, the main issue for the banque de france is how we can facilitate and accompany the digitalisation of the financial sector, which is a source of efficiency gains, while at the same time preserving the stability of our monetary and financial system. in order to present the concrete responses we are trying to bring to this issue, i shall start by reminding you of the new challenges posed by digitalisation to the safety and efficiency of the financial sector, before describing the three main areas where we are working to respond, in line with our mandate. i. the digitalisation of the financial sector poses new challenges a ) in terms of security, one of the main concerns raised by the current digital transformation of the financial system is it or cyber - risk. the digital transformation considerably increases financial system participants ’ surface area of exposure to cyber - threats, and hence their vulnerability to such risk. this stems in particular from their internal transformations, which rely in large part on the development of open - platform it systems and on greater use of it outsourcing, especially via the cloud. the public health crisis has significantly amplified this exposure : the widespread use of remote working has been accompanied by a massive roll - out of new collaboration tools and new software. this ( sometimes hasty ) deployment of third - party software and new methods of labour organisation has amplified the overall vulnerability of the sector. the need for vigilance is being even further heightened by the fact that cyberattacks are evolving constantly and becoming increasingly sophisticated. on a technical level, this phenomenon can in part be explained by the diffusion of “ turnkey ” hacking tools and a general increase in computer skills. on an economic level, the huge financial rewards to be gained from attacks is leading to a surge in the number of potential hackers. this dual trend has taken cyber - risk into a whole new dimension : at the company level, it represents a

climate and environmental risk disclosures. french banks have a head start in this regard, owing to the statutory disclosure requirements applicable to institutional investors since 2015 and the ongoing dialogue in recent years with the acpr, notably aimed at measuring action on climate 2 / 6 bis central bankers'speeches commitments. 1. 3 these vulnerabilities are a source of risk for financial stability [ slide 4 ] the vulnerabilities that i have just outlined could affect financial stability. if the public and private responses to these structural developments fall short, banks could be weakened, which in turn could adversely impact the real economy. in terms of the digital transition, competition from new intermediaries, such as fintechs, bigtechs and defi players, along with the rise of private digital assets like stablecoins and cryptoassets could ( i ) lead to fragmentation of financial and payment services, making them less safe and efficient, and ( ii ) cause banks to be crowded out of the value chain by the “ platformisation ” of financial services. defi especially is seeing pronounced growth, although the amounts in play remain small in absolute terms, as the chart illustrates [ slide 4 ]. moreover, these new participants and products are not currently subject to regulations and supervision comparable to those applicable to banks. this situation could eventually impact financial stability, notably if it is accompanied by decreased regulation of critical financial and payment services providers and a reduction in the security associated with regulation. as regards the challenge of moving to a more sustainable economy, the financial sector and the wider economy could be hurt by an inadequate or delayed response to the accelerated transition to a carbon - neutral economy. allow me to illustrate my point with an example : the banque de france conducted simulations based on macrofinancial scenarios prepared by the ngfs, which found that a delayed and disorderly transition would be far more damaging, costing up to 5. 5 % of french gdp by 2050. given their lynchpin role in financing the economy, banks must continue to be resilient amid the twin transition. this is especially necessary in europe where, unlike in the uk and us economies for example, bank loans are the main source of financing, accounting for approximately 70 % of financing for euro area businesses, compared with around 40 % in the united states. in saying this, i do not want to give the impression that banks are alone in providing financing to the economy. on the contrary, they need to harness the complementarities offered