. this nexus opens the debate on the so - called " financial dominance ", the possible tradeoff between rising costs to curb inflation and effects for financial stability. against this background, one of the key questions is how well are financial systems prepared to rise to the challenge of rising interest rates. the answer to great extent boils down to the health of the balance sheet of households, companies and banks, i. e., their capacity to absorb shocks. what is very important is that banking systems in the region weathered the pandemics shock well and in many countries, including in nm, emerged with even stronger capacity, which can be observed by higher capital and liquidity buffers and better quality of credit portfolio. although according to the recent eib surveys banks expected deterioration of credit quality, npl ratios have remained low ( below 4 % ). still, given the elevated debt levels of the private sector that hovers around 80 % of gdp, increase in real estate prices, which in cesee reached 15. 5 % - the highest growth since the gfc, as well as 2 / 4 bis - central bankers'speeches expected further tightening of the credit conditions, it is not time for complacency. one of the key lessons learnt from the covid 19 crisis is the resilience and it must remain the name of the game for the banking sector going forward. in the current context when the interplay between monetary policy and financial stability is more complex, and trade - offs are larger, macro – prudential management plays an important role. a recent bis paper finds that prudential policy tightening, ahead or during the monetary policy tightening, reduces the likelihood of financial stress and provides more headroom for monetary policy. following the pandemics, countercyclical or systemic risk capital buffers were actively deployed across the region. financial regulators in seven countries, including in our case, intervened with the countercyclical capital buffer4, in six countries ( bulgaria, croatia, romania, slovenia, serbia and montenegro ) have continued to apply or introduced the systemic risk buffer and in five countries implemented borrower - based measures5, which more directly affect the quality of credit demand and contain risks. keeping banking sector sound and in good capacity to lend is important in the light of the urgently needed structural reforms in the region. as we are lagging behind advanced europe in terms of income and productivity, sustaining banks'financing can contribute in narrowing those gaps. at the same time,

financial markets infrastructure. we strongly believe that the hub will be a central point of contact with the industry, including the fintech firms, and will enable building internal capacities for adequate implementation of the new technologies and monitoring of the associated risks, as well as serve as a platform for sharing information and discussing best practices. finally, the innovation hub will also bring the prospect of using digitalization for supervisory purposes, as a complement to our current supervisory methods, principles, and judgement. suptech is becoming synonym for exploring new technologies, especially in the area of supervisory data collection and analysis. the survey performed by the financial stability institute on the use of innovative technology2 reveals that within data collection, supervisory agencies across the world use applications for supervisory reporting, data management and virtual assistance, while within data analytics, applications are used for market surveillance, misconduct analysis, as well as micro - prudential and macro - prudential supervision. to facilitate the contact with the industry, the national bank has recently developed an innovation gateway, as a platform where firms can raise questions and get answers concerning the regulatory framework. the main purpose of the gateway is to facilitate, encourage, and support innovation in financial services, by providing information to all firms willing to pursue innovative business activities. it provides a clearly visible interface to our website and offers an insight view on issues related to application of new innovative technologies. we are pleased that through this channel, launched a couple of weeks ago, we have already received several queries from fintech firms coming from eu member states as well as local fintech company that intends to offer new services in the payments area. our internal expert group will interact with these entities to properly understand their business model, the benefits they bring, potential risks and asses how they fit in the current regulatory framework. one of the main priorities of the hub in the following period will be to develop a financial services digitization strategy. the main goal of the strategy will be to provide an enabling environment, including open and affordable access to core digital services and infrastructures. one of the main components of this strategy is to landscape the fintech ecosystem in the country and to identify the emerging financial services business models and the key barriers to entry for newcomers. a very important component of this strategy will be an analysis of the current national regulatory framework, trying to identify and consider whether it is sufficiently certain and flexible to apply in the modern digital context. a legal framework that is consistent, clear, and predictable is key to fintech innovation