speech speech by governor lars rohde at the annual meeting of the danish bankers association 5 december 2016 check against delivery thank you for inviting me to speak. i have these two key messages today : 1. increased digitisation is good news for customers, banks and society in general. 2. increased digitisation also makes the sector more vulnerable to destructive hacker attacks, but danmarks nationalbank and the sector are continuously working to prevent this. * * * the danes have gone digital – and very much so. there are more mobile phones than people in denmark, and nearly all homes are online. in fact, digital readiness is higher in denmark than anywhere else. [ chart 1 ] technological advances have changed the way banks operate. new possibilities have paved the way for a number of initiatives that have made the financial sector more efficient. this benefits the sector, and it benefits the danes. with increased digitisation, more processes can be automated and customers can increasingly serve themselves. this reduces the need for branches and employees – a trend that has been seen for some years as this chart shows. [ chart 2 ] page 1 of 5 technology has made digitisation a competitive parameter, which means that all banks are trying to attract customers by offering the best digital products. however, it has also opened the door to increased competition from new actors, who will be able to enter areas that used to be completely dominated by the banks. competition is good, and there are no indications that we will have less competition in future. in fact, we can expect fiercer competition as a result of the eu's new payment services directive, psd2, which could be a game changer for the financial sector. psd2 allows third parties – with the customer's consent – to gain direct access to perform transactions in a customer's bank account. a third party could be e. g. a coffee chain, an airline company or another bank than the one where the customer has a deposit account. the point is that psd2 allows new actors to offer payment services without providing deposit accounts. once they have got a foot in the door, they will also be able to offer other services, such as loans, which are actually sources of income for the banks – unlike payment services. the danish banks have been good at moving with the times and developing their own digital products. examples are mobile payment solutions, which have become very popular among the danes. these solutions have helped to prevent foreign actors from gaining significant market shares in

gradually waning, even well before the introduction of the euro. in italy, potential growth declined from an average estimated at around 2. 5 % in the early 1990s, to 1. 5 % by 1999. the decline continued afterwards, and is now estimated by the imf and other institutions to be close to zero. so how can we reverse this trend? raising potential growth is principally about lifting the labour supply ( the amount of hours people work in the economy ) and productivity ( how much people produce per hour worked ). see my introductory remarks at the economic and monetary affairs committee of the european parliament, brussels, 23 march 2015, http : / / www. ecb. europa. eu / press / key / date / 2015 / html / sp150323 _ 1. en. html. bis central bankers ’ speeches given our ageing population, however, we can only expect limited gains on the labour side. we therefore have to focus our efforts on making our economies more productive. for most countries in europe, and for italy in particular, productivity growth rates have been very modest. between 2000 and 2013 productivity 2 in the euro area grew cumulatively by 9. 5 %, by barely 1. 3 % in italy and by 26. 1 % in the us. total factor productivity 3, which assesses the efficiency of the use of inputs to productive processes, has only grown by 1. 1 % in the euro area. in italy it has fallen by 7. 7 % and in the us it has risen by 10. 5 %. productivity can be raised through the emergence of new firms using more efficient technologies and by the reallocation of resources among already existing firms. the benefits of technological progress often appear over the longer term because the efficient use of a new technology often takes a long time to learn, while the reallocation of resources can lift productivity over a shorter time horizon, given that it implies a shifting of resources within already active firms. if we want to raise productivity quickly, the key factor is reallocation. firm - level analyses in the euro area suggest that there is much scope for improvement here. 4 within individual countries there are a few highly productive firms and many which have low productivity. it is essential to act so that those high - productivity firms can grow, so that they can benefit from an adequate flow of capital them and so that the people have the skills needed to be able to work there. to achieve each of those three goals – growth,