ensuring stability in turbulent times1 your excellencies, distinguished guests, sabah - al - khair and a very good morning. i am very delighted to be here today and i am grateful to h. e. dr. abdulrahman a. al hamidy for inviting me to speak before this august gathering. thanks to the active collaboration of the basel committee on banking supervision, financial stability institute, and the arab monetary fund, these high - level meetings provide a valuable forum for exchange of views for the regulators and supervisors in the region. the agenda of this conference adequately captures key developments, issues, and challenges that we need to focus our attention on. today, i would like to touch upon two major forces that have swept across the financial world. first is the tech - driven revolution, which has brought its own set of risks and rewards. second is the wide range of measures that have been introduced to strengthen the resilience of our banking systems. let me start with innovations first. innovation ; opportunities and risks tech - driven innovations have unleashed drastic changes in the way we conduct business, interact with each other, or consume various products and services. financial sector, essentially an ‘ information industry ’, is experiencing a major transformation, fueled by advances in technology. though the imprint of modern technologies is now ubiquitous, let me briefly highlight a few areas of finance where the developments are particularly significant. 1 keynote speech delivered by his excellency dr. mohammad y. al - hashel, governor, central bank of kuwait in the 12th high level meeting for the middle east & north africa region, jointly organized by the basel committee on banking supervision, the financial stability institute and the arab monetary fund, held on december 7, 2016 in abu dhabi, uae. to start with, technology is supporting the outreach of formal financial services to the millions of otherwise unbanked customers. according to the world bank, the poorest 20 % of the world population is more likely to have access to a mobile phone than to clean water and sanitation. capitalizing on this opportunity, a number of countries have managed to swiftly expand access to finance in recent years. globally, number of adults who were previously out of formal financial system has dropped by 20 % during 201114 alone. as these encouraging trends suggest, digitalization offers an unprecedented opportunity to improve access to finance to the millions of people who have remained financially excluded so far. likewise, programing breakthroughs like blockchain are potentially transforming the way we verify transactions and enforce

contracts. by allowing parties to transact without central intermediaries, blockchain can strip off costs, reduce inefficiencies, and enhance customer services. host of other innovations are reshaping the way we transfer money or obtain credit. for instance, mobile wallets are enabling payments by smart phones, peer - to - peer lending is providing new sources of financing, and roboadvisors are offering financial advice. while undoubtedly exciting, these developments bring in their own unique risks and challenges. i would like to flag a few of them, particularly from the standpoint of financial stability. first, cyber security risk is becoming an increasingly major part of banks ’ operational risk landscape. as various hacking episodes illustrate, now fraud can be perpetrated swiftly, remotely, and on a massive scale. though such occurrences are still uncommon, the impact is substantial, given the high degree of interconnectivity of our systems and markets. second, fintechs are unbundling parts of the finance value chain, offering financial services directly to customers. apart from increasing competition, and squeezing banks ’ profits, fintechs are moving part of the banking business to shadow banking which remains lightly regulated, if at all. likewise, tech - enabled peer - to - peer lending and crowdfunding can further expand the scale of shadow banking, and may also exacerbate procyclicality. as this discussion indicates, innovations are by nature a disruptive force, causing a considerable degree of instability. therefore, regulators face a daunting task of keeping financial systems safe and stable while continuing to ensure the convenience and efficiency that modern technologies offer. to ensure that, we must strengthen our own capacity to identify, monitor, and mitigate the risks from technological innovations. this would require closer cooperation with the banking industry as well as among regulators, both within a country and across the borders. yet that is not enough ; we also need to leave our comfort zone and engage with other stakeholders, primarily the tech firms themselves. ultimately, as regulators, we wish neither to stifle innovation nor to undermine financial stability – and it is indeed a very delicate balance to achieve. similar to when navigating unfamiliar domains, we need to remain agile, adaptive, and proactive – this will ensure reaping the enormous benefits of financial innovations, yet limiting their downside. let me now turn to the second part of my speech. regulatory reforms ; costly but essential banking regulation has been