francois villeroy de galhau : digital innovation - what role can we play as central banks? speech by mr francois villeroy de galhau, governor of the bank of france, at the singapore fintech festival, 8 november 2021. * * * ladies and gentlemen, it is always a great pleasure for me to have the opportunity to speak at the singapore fintech festival, and i wish to thank ravi menon and the monetary authority of singapore for organizing it. although i am joining from paris today, i look forward to coming back to singapore soon to continue exchanging. innovation may not be the first thing that comes to mind about central banks. after all, our institutions have been around for quite some time : mas just turned 50 – and i take this opportunity to congratulate this golden jubilee –, and banque de france is more than 2 centuries old. we are more associated with stability than disruption … yet the blossoming of digital innovation has the potential to transform the financial system in its entirety. we have to embrace these changes, but there are also things that we need to preserve in this process : the stability of the financial system. innovation and stability can appear as contradictory in the short run ; but they are complementary through a common value ; a keystone : trust. trust of the public in money. to be implemented effectively, these dual principles of innovation and stability require a cooperative setting. i will focus on how these principles can be put into practice, first through how regulation can address new risks, and then how central banks can foster innovation, with the example of central bank digital currencies. i. new risks, new rules? no corner of the financial system is left untouched by digital technologies, a look at the agenda of this fintech festival tells it all : payments, decentralized finance and open banking, crypto - assets, central bank digital currency, quantum computing, etc … these technologies bring competitive pressure and such innovative pressure is healthy : it challenges inefficiencies, helps improving services, brings down costs. fintechs are key players in the modernisation of the financial sector and i expect banks in particular to seize more systematically the opportunity to participate to this transformation. can i quote joseph schumpeter? he wrote that “ most of the creations of the intellect or fancy pass away for good after a time that varies between an after - dinner hour and a generation. some, however, do not. ” fintech has clearly made it pass the after

also are important public objectives. the key issue is whether the current set of rules appropriately balances these interests. in light of the importance of the various interests involved, the congress should consider initiating a process through which the parties of interest may exchange views and develop potential policy options for the congress ’ s consideration. organization structure for data collection and developing analytical tools in addition to balancing the costs and benefits of enhanced data and analytical tools, the congress must determine the appropriate organizational form for data collection and development of analytical tools. budget costs, production efficiencies, and the costs of separating data collection and analysis from decision - making are important considerations. any proposed form of organization should facilitate effective data sharing. it also should increase the availability of data, including aggregated supervisory data as appropriate, to market participants and experts so that they can serve the useful role of providing independent perspectives on risks in the financial system. the current arrangement, in which different agencies collect and analyze data, cooperating in cases where a consensus exists among them, can certainly be improved. the most desirable feature of collection and analysis under the existing setup is that it satisfies the principle that data collection and analysis should serve the end users, the regulatory agencies. each of the existing agencies collects some data from entities it regulates or supervises, using its expertise to decide what to collect under its existing authorities and how to analyze it. moreover, the agencies seek to achieve cost efficiencies and to reduce burdens on the private sector by cooperating in some data collection. an example is the consolidated reports of condition and income, or call reports, collected by the bank regulatory agencies from both national and state - chartered commercial banks. the content of the reporting forms is coordinated by the federal financial institutions examination council, which includes representatives of both state and federal bank regulatory agencies. a standalone independent data collection and analysis agency might be more nimble than the current setup because it would not have to reach consensus with other agencies. it might also have the advantage of fostering an overall assessment of financial data needs for all governmental purposes. however, there would also be some substantial disadvantages to running comprehensive financial data collection through a separate independent agency established for this purpose. a new agency would entail additional budget costs because the agency would likely need to replicate many of the activities of the regulatory agencies in order to determine what data are needed. more importantly, because it would not be involved directly in supervision or market monitoring, such an agency would be hampered in its