##ystem will discontinue the production and issuance of € 500 banknotes. the elimination of the largest - denomination banknote is hoped to have an impact in limiting the underground economy and making all kinds of illegal transactions more difficult. its use in ordinary transactions has not been large in any case. some people have been disappointed by this decision, and interpreted it as a sign that the ecb is taking a more negative view on the future of cash in general. this is a misinterpretation. the decision should not be overdramatized. for a comparison, in the u. s. the $ 100 bill is the largest banknote. the ecb is not taking a radical step in discontinuing a € 500 banknote. at the same time the new series of € 200 and € 100 notes will be introduced to meet the all the demand. there is no change in our attitude on the future of cash. * * * to conclude, cash has never been more interesting than now. increasingly, the central banks and the whole society need analyses which go to the foundations of the monetary and payments system. i trust this conference will make a valuable contribution to this fascinating research area. i thank you for your attention, and wish you a very productive conference day. bis central bankers ’ speeches

seppo honkapohja : financial innovation and financial stability – comments speech by mr seppo honkapohja, member of the board of the bank of finland, at the shanghai forum, shanghai, 26 may 2014. * * * slides can be found on the bank of finland website. introduction : the global financial crisis and the crisis in europe the start of the global financial crisis can be dated in different ways. one plausible date is almost seven years ago in august 9 in 2007. significant turmoil in financial markets appeared after activity closures in some hedge funds specializing in us mortgage debt were announced. the scale and the economic ramifications of the crisis have been vast. the resulting economic downturn in 2008 for a while resembled the pace of developments in the great depression. 1 liquidity support operations by central banks at different stages, explicit state guarantees to banks and expansionary fiscal policies succeeded in stopping the recession and changed the course of developments in comparison to the 1930 ’ s. in europe, a further stage of the crisis appeared in 2010 when a sovereign debt crisis hit some euro area countries. the euro crisis has its roots in the specific features of construction of the european monetary union, but it was also triggered by the second - wave shocks following the global financial crisis. [ figure 1 : substantial crisis impact on the real economy, particularly in europe ] the financial crisis weakened the euro area economies and it also weakened bank balance sheets. in several countries governments were forced to support their troubled banks, which in turn adversely affected government finances. in some countries public finances became weak, which fed back to the credibility of their banking sectors, thus creating a notorious bank - sovereign feedback loop. troubled countries ’ membership in the monetary union added to the challenge to restore their competitiveness as traditional tools such as devaluation were no longer available. it became evident that the fiscal rules agreed in the monetary union had not always been honored. these developments raised concerns about credibility of the weak euro area countries in international capital markets. the so - called existential risk of the euro zone emerged. the culmination of the eurocrisis in mid - 2012 was tamed by the creation of the ecb ’ s omt ( outright monetary transactions ) program. i quote president draghi ’ s promise that “ within [ its ] mandate, the ecb is ready to do whatever it takes to preserve the euro ”. 2 omt is a conditional promise to buy in the secondary market without limit government bonds