so they argue – could create market distortions and large risks for the eurosystem ’ s balance sheet. the eurosystem is taking this criticism seriously. however, it should be duly noted that, throughout the difficult times of the financial and sovereign debt crisis, the broad collateral framework was regarded as a great institutional strength of eurosystem ’ s monetary policy. while the pledged collateral has successfully protected the eurosystem from financial losses, at the same time the collateral framework has been flexible enough to preserve the eurosystem ’ s ability to support market functioning and provide liquidity to the banking system in times of stress. the eurosystem thereby fulfilled one of the core functions of a central bank. 3. 2 regulation as is apparent from the agenda of this conference, regulatory issues have become a crucial factor in financial markets, cropping up in almost every agenda item. in the aftermath of the financial crisis, national and european regulatory initiatives alike have mushroomed. in a nutshell, the regulations involve stricter rules for capital, stricter provisions for risky transactions, and higher administrative burdens. at the bundesbank, we are fully aware of these strains and the potential drawbacks of regulatory requirements. liquidity in the bond and repo markets has decreased, also – but not only – because of new regulations. moreover, the higher required capital ratios will increase banks ’ cost of capital while banks ’ earnings are currently compressed. this is making it difficult for banks to raise further capital, which is why they may respond to regulatory requirements by deleveraging. this, in turn, may well have negative effects on market liquidity. at the same time, it is evident that well - designed regulatory measures will help make the financial system more stable. the ultimate aim is to make financial markets more resilient and crisisproof in the future. higher resilience will restore market and customer confidence in banks. this 5 / 7 bis central bankers'speeches is intended partly make up for the higher costs of capital and allow banks to attract more customers and funds. in the long run, a stronger capital base can be expected to enhance banks ’ loan origination capabilities. these are thus positive effects of regulation which need to be recognised. i am convinced that we need effective and well - targeted regulation. this also means that we need to closely monitor all effects – intended and unintended – and consider making adjustments, if necessary. but even if targeted adjustments are made to the regulatory framework, i believe

here i have in mind particularly the possibility to employ regtech and suptech tools to boost aml / cft compliance. with the amount of money laundered globally ranging from 800 billion to 2 trillion us dollars each year, fintech can definitely lend a helping hand. moving on to the challenges, what stands out is the potential impact of fintech on the broader financial system. by building novel consumer relationships, fintech firms put pressure on the operative models of established financial institutions. to be more precise, nearly 90 % of incumbents in europe and asia claim that at least part of their business models is at risk due to rising competition from innovators. this suggests that traditional players either have to change, or they risk losing market share – or even being completely pushed out of game. yet it is not only established financial institutions that need to change. the regulator community is facing a similar challenge. without adapting our frameworks, we risk being sidelined and unable to meet expectations – especially when it comes to issues like ensuring financial stability. more and more regulators around the world – including within the 16 + 1 framework – seem to have realized this, tailoring their toolkits and choosing to facilitate rather than restrict innovations. as we move towards more regulatory flexibility, we have to remain alert concerning the new risks stemming from fintech. this has to do, first and foremost, with cyber security. relying on novel technological solutions, such as cloud computing, certainly offers efficiency gains for financial entities. but it also creates additional headaches for regulators, as critical ict infrastructure of the supervised institutions, as well as vast amounts of sensitive data are exposed to hacking and other forms of malware. apart from this, it is essential to keep a close eye on the potential intensification of macrofinancial risks. while currently fintech does not pose a direct threat to financial stability due to its limited overall size, the situation may change rapidly if left unchecked, especially given the rapid expansion of the sector. and a hidden build - up of risk is definitely not the outcome we as regulators would like to see. fintech developments have also lately attracted elevated attention from international financial institutions. various risk mappings and assessments of the opportunities embedded in financial innovations have been carried out by the financial stability board, the basel committee on banking supervision and other key bodies. just last month the international monetary fund announced its fintech agenda, which will serve as the basis for deeper fund ’ s involvement in the