in robust credit activity. in this context let me say that the process of financial deepening, which is taking place in almost all countries that joined the eu in 2004 and 2007 will also support economic development as it is expected to promote more efficient investment. however, this process does require careful monitoring and strong prudential supervision, in particular if financial deepening takes place at a very rapid pace. another element of slovenia ’ s successful convergence experience is its participation in the exchange rate mechanism ii ( erm ii ). slovenia ’ s participation in the mechanism has been smooth. the parity at which slovenia entered the erm ii was set at the market rate at the time of erm ii entry and the tolareuro exchange rate remained very close to the parity for the entire period of erm ii participation. as a consequence, the eu council decided that the central parity should also become the final conversion rate of the tolar to the euro. let me use this opportunity to stress again that participation in erm ii is a very important step on the road to the euro. a smooth participation in erm ii is testimony for the sustainability of the necessary convergence process prior the adoption of the euro. erm ii participation ties the exchange rate and hence acts as a “ testing phase ” of the irrevocably exchange rate fixation. in this respect, the mechanism provides flexibility with a 15 % band around the parity and the possibility of mutually agreed realignments of the parity. let me also recall that while two years of participation are the minimum period required, there are no limits on the maximum length of the participation. this in turn allows countries which have not yet achieved a sufficient level of sustainable convergence with regard to all criteria to adequately prepare for the single currency while already enjoying the benefits of a stable exchange rate anchor. let me at this point also mention that currently there are seven countries participating in the erm ii ( denmark since 1979 [ erm i ], estonia and lithuania that joined erm ii in 2004, cyprus, malta, latvia and slovakia that joined in 2005 ). for these countries, the erm ii experience has been and remains a useful test to check whether their economies can work smoothly under conditions of stable exchange rates or whether further efforts are needed to make the convergence process sustainable. finally, let me say that the ecb has established excellent working relations with banka slovenije over the last couple of years. already prior to eu accession,

brought by market - based finance, as an alternative to retail banking, means that peer - to - peer lending has potential to provide some consumers and small businesses with affordable credit, when retail banks cannot. at the same time, this implies that borrowers in some segments may be placing increased reliance on this source of funding. how stable this funding will prove through - the - cycle is not yet clear, as the sector ’ s underwriting standards, and lenders ’ tolerance to losses, have not been tested by a downturn. due to its small scale and business models, the p2p lending sector does not, for now, appear to pose material systemic risks. that said, as a general rule, it always pays to monitor closely fast - growing sources of credit for slippages in underwriting standards and the promotion of excessive borrowing. moreover, it is not clear the extent to which p2p lending can grow without business models evolving in ways that introduce conventional risks, including maturity transformation, leverage and liquidity mismatch, or through the use of originate and distribute models such as those seen in securitisation in the 2000s. were these changes to occur, regulators would be expected to address such emerging vulnerabilities. in wholesale banking and markets, robo - advice and risk management algorithms may lead to excess volatility or increase pro - cyclicality as a result of herding, particularly if the underlying algorithms are overly sensitive to price movements or highly correlated. similarly, although algorithmic traders have become a more important source of market liquidity in many important financial markets, they tend to be more active during periods of low volatility giving an illusion of plentiful liquidity that may subsequently be withdrawn during periods of market disruption when it is needed most. fintech innovations, such as distributed ledgers, are being trialled for use within, or as a substitute to, existing wholesale payment, clearing and settlement infrastructure, will need to meet the highest standards of resilience, reliability, privacy and scalability. all speeches are available online at www. bankofengland. co. uk / speeches for all financial firms, the advent of fintech materially changes operational and cyber risks. regulators need to be alert to new single point of failure risks such as if banks come to rely on common hosts of online banking or providers of cloud computing services. in recent years, the cyber threat to the system has grown as financial institutions have become more reliant on