new competitors carving up the banking business between them may appear to have given way to a period of sounding out which business ideas stand to be feasible, there ’ s no getting around one simple fact. the influx of new rivals, combined with the advent of more efficient technology and a more discerning customer base, hasn ’ t exactly eased the pressure on the sector as a whole to consolidate. second, many forward - looking ideas still need to show what they ’ re made of. the entrepreneurial balancing act, as it were, is to get to the bottom of developments early on and put together a broadly balanced business franchise. blockchain technology, an innovation that has repeatedly grabbed the headlines, illustrates this challenge well. its potential for slashing costs, boosting efficiency and streamlining turnaround times, it is said, is immense. this projection comes as no surprise, seeing as blockchain does indeed promise to revolutionise ledgers and settlement processes by making accounts for financial transactions available to all parties simultaneously as original documents, so to speak, and virtually in real time. blockchain technology thus has the potential to drive down costs, reduce processing times and possibly even boost the accuracy of not just payments, but securities trading and complex contracts as well. on the other hand, blockchain applications are not a trivial matter in either technological or legal terms. whether or not this technology, on balance, is worth it for a value chain in the banking industry thus hinges on a large number of concrete questions. the particular challenge for institutions lies in the fact that successful blockchain applications and other innovations could, thanks to network effects, potentially quickly become the new standard. in other words, technology can have a disruptive impact on individual business models. that is why it is advisable to confront technological and societal change proactively and to develop a strategy. quite apart from this, the banking industry should also use the opportunity presented by digitalisation to become more profitable than before. digitalisation must on no account be reduced to a zero - sum game in which players aim to divide up a cake without changing its overall size. costs can be cut significantly in the medium term, and fees justified by innovative services. but whether it ’ s a multi - channel bank, a purely smartphone - based bank or a niche institution : as a banking supervisor, it is not my place to evaluate business models and strategies. nor do i wish to have the final say on how banks can and must be as

innovative as fintechs. that is accenture ( 2015 ) : the future of fintech and banking : digitally disrupted or reimagined? bis central bankers ’ speeches up to the market, at the end of the day. but supervisors have an interest in sustainably profitable institutions. if they don ’ t have a strategy relating to the digital age, however, institutions do not have a sustainable position as far as i ’ m concerned. the entire business organisation, from the it architecture to long - term staff management, hinges on the digital strategy. digitalisation therefore has to be addressed by senior management as a matter of priority. the flipside of digitalisation is the security and reliability of banking business. here is where digitalisation disrupts the story, if not beforehand. operational risk in it is becoming increasingly important, and the digitalisation of banking has transformed financial crime. a large number of reasons can motivate cyber attacks, which range from simple attacks by amateurs to meticulously planned attacks with an economic or political background. at the same time, new hacking methods are spreading through the net at lightning speed and are constantly evolving. a global study conducted in 2015 revealed that 61 % of ceos believe that cyber risks present a key threat. 2 financial institutions were therefore ranked first out of all sectors in 2014 as the main purchasers of insurance against cyber risks, with average limits of us $ 57 million. 3 banking supervisors have been bringing it risk and cyber risk more into focus for many years now, for precisely these reasons. after all, their importance can ’ t be estimated highly enough. in the digital age, trust in banks is particularly synonymous with trust in it. hence, it and cyber security remain one of the priorities for the single supervisory mechanism in 2016. as financial supervisors, we therefore call on credit institutions explicitly to manage their it and cyber risks just as diligently as they would the traditional risks in banking business. an end - toend system of cyber defences cannot be created from the bottom up by the it department – i am certain it is, at its roots, a management task. and it is crucial, not just for the institutions, to evolve in tandem with these developments. i would therefore like to turn my attention now to banking supervision. 3. banking supervision must evolve in tandem with developments... naturally, supervisors cannot provide an exact prescription for it and cyber security, as it applications and the cyber environment are so changeable these days that technical details become