contracts. by allowing parties to transact without central intermediaries, blockchain can strip off costs, reduce inefficiencies, and enhance customer services. host of other innovations are reshaping the way we transfer money or obtain credit. for instance, mobile wallets are enabling payments by smart phones, peer - to - peer lending is providing new sources of financing, and roboadvisors are offering financial advice. while undoubtedly exciting, these developments bring in their own unique risks and challenges. i would like to flag a few of them, particularly from the standpoint of financial stability. first, cyber security risk is becoming an increasingly major part of banks ’ operational risk landscape. as various hacking episodes illustrate, now fraud can be perpetrated swiftly, remotely, and on a massive scale. though such occurrences are still uncommon, the impact is substantial, given the high degree of interconnectivity of our systems and markets. second, fintechs are unbundling parts of the finance value chain, offering financial services directly to customers. apart from increasing competition, and squeezing banks ’ profits, fintechs are moving part of the banking business to shadow banking which remains lightly regulated, if at all. likewise, tech - enabled peer - to - peer lending and crowdfunding can further expand the scale of shadow banking, and may also exacerbate procyclicality. as this discussion indicates, innovations are by nature a disruptive force, causing a considerable degree of instability. therefore, regulators face a daunting task of keeping financial systems safe and stable while continuing to ensure the convenience and efficiency that modern technologies offer. to ensure that, we must strengthen our own capacity to identify, monitor, and mitigate the risks from technological innovations. this would require closer cooperation with the banking industry as well as among regulators, both within a country and across the borders. yet that is not enough ; we also need to leave our comfort zone and engage with other stakeholders, primarily the tech firms themselves. ultimately, as regulators, we wish neither to stifle innovation nor to undermine financial stability – and it is indeed a very delicate balance to achieve. similar to when navigating unfamiliar domains, we need to remain agile, adaptive, and proactive – this will ensure reaping the enormous benefits of financial innovations, yet limiting their downside. let me now turn to the second part of my speech. regulatory reforms ; costly but essential banking regulation has been

our monetary policy portfolios? how should central banks respond to calls on our social responsibility in the face of a potential twin failure – a market and a political failure? nobel laureate jean tirole reminds us that “ our moral duty is to eliminate coal, not to pretend we do ”. he notes : “ [ divestment ] has little impact if other investors jump at the opportunity of undervalued fossil fuel stocks and bonds [ … ]. it also has no impact if the plants already exist, as they do not need ﬁnancing. in such cases only a carbon price will have an impact on emissions. ” indeed, studies suggest that the eurosystem ’ s corporate bond purchases have compressed yield spreads not only for those bonds purchased or targeted, but also for non - eligible bonds. [ 15 ] such an indirect impact can be due to the portfolio rebalancing channel, as our purchases may push investors into riskier asset classes. thus, even those “ green ” bonds that are not eligible might have beneﬁtted from our purchases to some degree. at the same time, the impact of potentially excluding carbon - intensive ﬁrms from our portfolio should not be overestimated. monetary policy cannot be a substitute for putting the right price tag on carbon emissions. and i am very critical of suggestions that monetary policy should be used to actively pursue climate policy goals. let me highlight three reasons. first, conﬂicts with our primary objective of price stability may arise. indeed, it would be short - sighted to assume that inﬂation will hover at very low levels forever. [ 16 ] when necessary in order to maintain price stability, the eurosystem needs to apply the brakes and scale back its asset purchases or portfolio. but the need to promote the transition of the economy would not simply vanish. second, it is not the task of the eurosystem to penalise or subsidise certain industries. correcting market distortions often has intricate distributional implications. such decisions need strong democratic legitimacy and are a matter for governments and parliaments. they have the right tools at their disposal and, as elected representatives, they also have the democratic authority to use those tools. at the same time, they have to weigh the ﬁght against climate change against other policy goals. third, central banks should beware of mission creep. to quote jean tirole once more : “ we must resist this trend of governmental agencies becoming jacks of all trades