a responsible manner. community banks engage in a range of partnerships with fintechs, each pursued for different reasons, with varying levels of investment of time and resources. the paper describes key partnership types and the associated benefits, risks, and challenges that community banks experience with each type. the paper also identifies fundamental considerations for effective partnerships as described by community bankers. some valuable insights emerged from our outreach, which may benefit community banks at various stages of the innovation process. two important themes stood out : the first is establishing trust and aligning with fintech partners, and second, building a long - term culture committed to innovation. let me elaborate on each of these themes. in our outreach, bankers noted that it is critical for partnerships to be built upon a foundation of mutual trust and alignment of values. in some cases, due diligence efforts reveal that potential partners do not share the banks ’ values or objectives. one bank, for example, began discussions with a fintech company that could assist it with the bank ’ s paycheck protection program loan originations by providing a customer - facing application portal. after learning that this partner intended to sell the small business customer information it would obtain, the bank opted out of the partnership. instead, the bank looked to other fintech partners with values more closely aligned with its own. harnessing the full potential of technology innovation also requires a long - term, strategic commitment to innovation. many bankers spoke of the importance of knowing exactly what new technology is solving for, building a team they trust, and securing buy - in from both senior management and the staff responsible for implementation. bankers who have forged successful partnerships don ’ t innovate for the sake of being innovative but instead have a clear vision of their goals. for example, one bank partnered with a fintech company to roll out limited banking services to teenagers. its intention was to promote financial literacy among young people in the community and to prepare the bank to accommodate the preferences of a new generation. the bank also hired local college students to work with staff, combining the technological expertise of these more recent hires with the deep compliance background of the bank ’ s long - standing employees. 2 / 4 bis central bankers'speeches interagency fintech due diligence guide in addition to the paper, the federal reserve, office of the comptroller of the currency ( occ ), and federal deposit insurance corporation ( fdic ) have recently published a vendor due diligence guide to assist community banks with

economies after crisis prevention fails? more generally, it is cause for deep concern that new thinking on international financial architecture may involuntarily have counterproductive effects on latin america. our concern is that we simply end up with lower capital inflows and growth but no worthwhile gain in stability. subjecting the private capital to uncertainty and discretion will have this effect. the curtailment of official financial support with the purpose of eliminating moral hazard would at the same time fail to prevent liquidity crises. if the latter is more relevant than the former, as i think it is in latin america, the result would be not only less capital but also less stability! let me offer some concrete examples of our concerns in connection with the currently proposed modification of the basle capital accord for bank credit risk. as i already mentioned, idb has long had an interest in strengthening the regulatory framework for banks and making it flexible to accommodate financial stress. to the extent that the new regulatory capital rules provide emerging market supervisors with stronger tools for assessing the strength of a bank and for encouraging bankers to improve their risk management systems, i believe that the proposed new rules could contribute greatly to the development of more mature lending markets. having said that, it is important to recognize that in this proposal the cost of capital will increase in most of our countries. as you know, at present net bank lending has largely disappeared already and this may be a lethal blow to this class of credit. i am not sure this is a cost worth paying. apart from that, there are a number of concerns that i take the liberty to stress : • we do not think that the use of private rating agencies to determine capital requirements for sovereign lending is a good idea. first, it puts the agencies in a position to play god with countries ’ fortunes, which neither the region nor the agencies want. and second, it is likely to be destabilizing as agencies try to conform to market perceptions. • in contrast, in latin america we like to think that internal rating systems are a more sensible basis for a bis system. i should also mention that a number of countries in the region have successful public credit bureaus that should also be taken into consideration as a possible standard to be used in setting requirements. • the proposal that no private company should receive a rating better than its sovereign ’ s is not consistent with the evidence of corporate and sovereign market risk spreads and appears to be an artificial limitation. • capital requirements on short - term loans