francois villeroy de galhau : central bank digital currency and innovative payments speech by mr francois villeroy de galhau, governor of the bank of france and chairman of the autorite de controle prudentiel et de resolution ( acpr ), at the acpr, paris, 4 december 2019. * * * ladies and gentlemen, one of the great things about the conferences organised by the acpr is their sense of timing : they always come in the middle of heated debates. today is no exception with the issue of the challenges faced by life insurance in a low interest rate environment. by way of introduction, let me agree with and sum up bernard delas ’ s message of this morning : french insurers are resilient and thus have the capacity to make the necessary dual adaptation. first, the rates paid on life insurance policies need to be lowered this year from last year ’ s average of 1. 8 %. next, insurers must actively restructure and diversify their offering for savers, while at the same time paying very close attention to the quality of advice they offer. if, as a complement – and only as a complement – regulatory adjustments are needed to facilitate this change in life insurance, then we are ready to support them. i would like to turn now to the topic for this afternoon which is dedicated to innovation. allow me to both restrict and extend the scope of the subject : restrict it to the field of payments which has seen a proliferation of innovations over recent years. and extend it beyond the scope of the acpr and the supervisory authority : i shall also speak as a central banker, and of a central bank digital currency ( cbdc ). driven by new market entrants, the digital revolution has brought with it a wealth of advancements that we profit from every day : but it also raises major questions about bank intermediation, and even about our monetary sovereignty. i would like to propose today that we take a stark look at these questions ( i ), and that we answer them by reiterating the two main pillars of our strategy : safeguarding confidence and supporting innovation ( ii ). i / the advances and challenges associated with the proliferation of private initiatives in the payment industry let us first recall the main trends that currently characterise the european payments market. the increasing digitalisation of cashless payments – which is leading to a sharp fall in cash usage in certain countries, from sweden to china – has been driven by

market transparency experience shows that uncertainty and incomplete information are determining factors in mimetic behaviour. these shortfalls in market transparency make mimetic behaviour seem rational to agents, who prefer to follow bigger participants, who are thought to be better informed, rather than develop their own analysis. strengthening transparency therefore continues to be a priority. one of the objectives of transparency is to enable better differentiation of borrower creditworthiness. a key feature of mimetic behaviour is that all borrowers are " tarred with the same brush ". so when one emerging economy encounters difficulties, all neighbouring countries, or countries that share common characteristics, are treated in the same way – regardless of their actual economic and financial situation. the same applies to businesses operating in the same economic sector. transparency has substantially increased since the asian crisis, thanks to a solid global consensus. let us continue and reinforce these efforts. take into account the medium and long - term perspective of some market participants some investors, such as pension funds and insurance companies, have to invest funds in order to enable their customers to build up wealth over the medium and long term, notably in preparation for retirement. consequently, these types of investors are supposed to behave differently from traders and short - term investors, who are working on a very different time horizon. but at times it seems that they are all pushed to behave in much the same way, on the basis of a very short - term horizon. to preserve, and even restore, their specific investment approach, these investors might be more shielded from excessive short - term pressures. this objective raises considerable difficulties, because it touches on the way in which the performances of medium and long - term funds ( including pension funds ) and life insurance companies are assessed. in other words, this objective concerns the accounting standards and practices they use. it implies that some rules and standards would be adapted to the medium and long - term horizon used by these entities. i have no answer at this stage. i am only asking the question. diversify the risk management tools of financial institutions as i mentioned earlier, even the best techniques can have adverse effects when used by too many participants. to some degree, this is perhaps what has happened to value - at - risk based techniques, which have been massively adopted by the financial industry. because they use more or less similar parameters and suffer from the same weaknesses – for example, they took inadequate account of market liquidity at the time of the 1998 crisis –, such tools tend to give con