denis beau : from open banking to open finance speech by mr denis beau, first deputy governor of the bank of france, at the france payments forum “ the europe of banking and financial services ” – paris europlace – france innovation, paris, 24 march 2022. * * * technological innovations, changes in demand, the arrival of new players : the changes underway in the financial sector are providing a strong impetus to relax the conditions of access to the market, in order to foster competition and thus encourage the development of new, more efficient and less costly services. in europe, in the field of payments, this relaxation has already occurred. the emd, the psd1 and finally the psd2 directives have all resulted in the emergence of more agile players, particularly in terms of data exploitation. the pressure to open up data now extends to insurance and savings : after open banking, we now speak of open finance. this pressure calls for further adapting the regulatory framework. but what should our guiding principles be? in the payments sector, the main objective of the directives i mentioned was to reconcile openness and security. while this challenge remains relevant for the transition from open banking to open finance, with digitalisation and the development of the platform economy, we have seen two other challenges emerge : reconciling innovation and integration on the one hand and competition and sovereignty on the other. how do we at the banque de france and the acpr, given our role and experience as a supervisor, plan to address these new challenges? this is what i would like to briefly discuss with you today, after a quick recap of the regulatory framework for open banking and the lessons that can be drawn from it to guide the development of open finance. part i : openness and security a - as regards the assessment of and lessons learned from the regulatory framework for open banking, i would like to start by recalling : 1 - the key principles that governed the sharing of payment data : on the one hand, the creation of appropriate statuses and, on the other, the strengthening of security requirements for access. the creation of the payment service or electronic money service provider status has fostered the emergence of an open banking ecosystem. the introduction of an agent status has also contributed to this process, by creating a gradual – proportionate – regulatory framework : it thus allows emerging players to test the suitability of their services with the market under the aegis of a licensed institution, before applying for a license themselves,

focus. the very large negative externalities associated with such failures could be realized through a classic domino effect or through contagion effects. as the financial crisis showed, losses in a tail event are likely to be correlated for large firms deeply engaged in trading, structured products, and other capital market instruments, and relying on similar sources of short - term funding. thus, the regulatory framework should aim to reduce the chances of distress or failure at such firms to a greater extent than traditional, microprudential regulation would. moreover, it should explicitly take into account the correlations and inter - dependencies in asset holdings and funding. finally, the regulatory system should aim to offset the perception of too - big - to - fail status, which carries with it the possibility of funding advantages in normal times, and protection of creditors and perhaps even shareholders in highly stressed times. the systemic perspective and consequent aim of protecting financial stability argue for the stronger and broader regulatory measures that have been undertaken in recent years. at the other end of the spectrum are community banks, conventionally defined as those with less than $ 10 billion in assets. the roughly 5, 700 banks in this group constitute 98 percent of insured commercial banks in the united states, but hold just under 20 percent of the aggregate assets of all commercial banks. indeed, 90 percent of community banks are what supervisors classify as “ small ” community banks – those with less than $ 1 billion in assets. while these banks will suffer the fallout from systemic problems, they are unlikely to cause such problems. the regulatory aim, therefore, is about as close as can be to the traditional microprudential bank regulatory aims of protecting the federal dif and limiting the use of insured deposits by restricting the scope of bank activities. it is true that the relative lack of geographic and portfolio diversification in many community banks can make them vulnerable to localized economic problems. but that is just the kind of problem that traditional microprudential regulation has been concerned with addressing. what, then, of the 80 or so u. s. banks that have assets of $ 10 billion or more, but are not among the eight large, complex institutions that have been designated of global systemic importance? obviously they vary enormously in size, from just over $ 10 billion in assets all the way up to very large regional banks with hundreds of billions in assets. they bridge the $ 50 billion threshold for enhanced prudential standards established by dodd - frank. yet, whatever their size