howard lee : central bank innovations - payments, data and capabilities speech by mr howard lee, deputy chief executive of the hong kong monetary authority, at the bis innovation summit 2021, 23 march 2021. * * * introduction 1. fellow central bankers, distinguished speakers, ladies and gentlemen. it ’ s my pleasure to speak to you in this important event. while participants of this event generally embrace technology and innovation, i guess that two years ago not many of us could have expected that virtual meetings would become a norm for international conferences. so while technological advances would often drive work process or behavioral changes, there are also times when societal changes spur technological developments or adoption. 2. of course the covid - 19 pandemic has had a lot more impacts than countless virtual meetings. the unprecedented disruptions and contractions in global trade have literally brought many economies to a standstill. small and medium sized enterprises ( smes ) are especially hard - hit given the smaller buffers they have. on the other hand, many ecommerce and other online activities are thriving. we are experiencing a much accelerated process of digitalization on many fronts. 3. these new developments call for central banks ’ innovations and digital solutions too. in the digital age, central banks will have to become innovators and commit ourselves to digital transformation for the benefit of our economies. in fact, the launch of the bis innovation hub ( bisih ) in 2019 is a testament to this commitment. for the coming year, bisih have announced 6 thematic priorities for driving innovations and staying ahead of the digital challenges. responding to new developments in the payments landscape 4. no doubt payment has been a key area for innovations in recent years. traditional payment systems have undergone transformation, not least with the introduction of fast payment systems. and new payment methods have emerged in the private sector. consumers are increasingly reliant on digital payments that offer better speed and convenience. however, when new forms of digital payment are increasingly used by the public, or even become the dominant means of payment in society, central banks would rightly be concerned about the resilience of the payment landscape, as disruptions could cause not just inconvenience, but also potentially significant economic damage. 5. at the same time, cryptocurrencies and stablecoins have emerged as a new class of assets that are sometimes claimed to be also a medium of exchange despite their volatility and concerns about their security. widespread adoption of these digital currencies by

policy rate to respond to adverse developments, recognizing that we could also use forward guidance and balance sheet policies to provide additional accommodation if that proved warranted. of course, the trajectory of short - term interest rates and the timing of future monetary policy adjustments will continue to be informed by the incoming data – both economic and financial – and how that data influences the outlook. the problem of long - term unemployment before turning to the outlook for the local economy, i would like to spend a few minutes talking about the problem of long - term unemployment. the great recession was very severe, resulting in a large decline in output and damage to the labor market. from peak to trough, non - farm payroll employment declined by 8. 7 million. the unemployment rate peaked at 10 percent. at the same time, the average duration of unemployment increased significantly. the number of individuals classified as long - term unemployed – that is, those who were unemployed for at least 27 weeks – peaked in december 2010 at 6. 4 million, an increase of 5. 3 million from the cyclical low in may 2007. long - term unemployment as a fraction of total unemployment increased from 16. 7 percent to 44. 8 percent. the hardships of prolonged unemployment touched many families around the country and this is tragic. the very accommodative monetary policy that we implemented in response was aimed at helping to heal the labor market and promote price stability. slowly, the economy began to respond and to recover. in october 2014, the fomc announced the end of its latest asset purchase program citing that “ there has been substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. ” in march 2015, the bis central bankers ’ speeches fomc set out conditions for the decision to begin to normalize monetary policy, stating “ the committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. ” the fomc judged at its december 2015 meeting that those conditions had been met. the improvement that we have seen in the labor market is very welcome. it took until may 2014 for the labor market to recover the jobs lost in the recession, but now there are 5. 3 million jobs beyond the prior cyclical peak. the unemployment rate has declined to 5. 0 percent. with this improvement, the number of