unrealistic to expect impaired assets to stay as low as they are now. credit quality necessarily ebbs and flows with the fortunes of the economy and particular sectors. what is important is that any deterioration is manageable against banks ’ capital, and that they recognise early the need for additional provisions. on balance, we believe that some current lending practices do risk sowing the seeds of future credit quality problems for banks. chief executives and boards should be considering carefully whether the additional point of market share that might be won now by lending to marginal propositions is worth the pain of future losses, the resources needed for loan workouts, and so on. they should also be alert to the possibility that the household sector might feature more strongly in the next upswing of losses. household debt has increased a good deal more quickly than incomes in recent years. the rba recently organised a credit conference to review trends in credit risk management, with participants including a number of leading bankers and accountants. a volume of readings and a summary of discussion will be published soon. the main theme from the conference was how credit risk assessment and management are becoming more objective, more scientific. one speaker described this as moving from an “ experience - centric ” approach to “ data - centric ” models. with standard products such as mortgages, consumer loans, credit cards and ( to some extent ) small business loans, quite sophisticated statistical methods are beginning to be applied to estimating default risk. the aim is to see, from an analysis of history, which data are most helpful in predicting the probability of default. such analysis produces “ scorecards ” for use in processing loan requests. increasingly, consumer loans are being managed on a portfolio basis, with banks calculating expected losses for various broad product categories. some are tracking the migration of loans through various stages of delinquency to help determine the proportion which will ultimately incur a loss. by updating the amounts at each stage, and adjusting migration rates in the light of current information, banks aim to measure more accurately the current risks in their portfolios. at the “ bigger ” end of the loan market, a lot of attention is being given to the accuracy and timeliness of risk - grading systems. to grade loans, the more sophisticated banks are now using complex statistical models based on financial information about borrowers or on equity prices. these feed into decisions about pricing, provisioning and portfolio balance. securitisation, the development of secondary markets and the use of credit derivatives

##chain. i will not go into the technical details, but this technology essentially makes it possible to do financial transactions as a chain of entries in a bookkeeping system that is accessible for everyone. the only thing you need to keep this running is a lot of computers. in such a system, decision - making, risk - taking and record keeping would all be decentralized. no balance sheets, no central records, no banks – at least in a traditional sense. it is clear that we are far from widespread adoption of fully decentralized technologies in financial services. but still, the combination of new technologies, new players and new business models raises mind - boggling questions about the future of finance and what that means for policymakers and supervisors. and that's the next issue i want to talk about. how can my colleagues and i, at de nederlandsche bank and elsewhere, ensure, also in the digital age, that the financial system remains robust, and you as consumers stay safe? whom should we supervise? do the existing policies and rules still apply? or should new rules be set? these are fundamental questions that we are dealing with at the moment. in the coming years, dnb will become more and more acquainted, in its supervision, with new technologies and new tech players. for instance, in the next few years, we and other financial supervisors will start overseeing large cloud providers that provide critical ict services to banks. we will also play an important role in supervising new technologies used by banks, such as artificial intelligence. crypto - asset, like bitcoin and many other, are a case in point. we and other central banks have been monitoring crypto - asset developments closely over the past years. the most recent risk assessment shows that markets for crypto - assets are fast - evolving and could reach a point where they represent a threat to the stability of the global financial system. 3 / 5 bis - central bankers'speeches probably a lot of you hold some form of crypto - assets. of course, it can be instructive to try things out on a small scale and get to understand the technology behind it. but i must say i have my concerns about crypto - assets. let's take for example all the misnomers that are doing the rounds. unbacked crypto - assets suggest all others are backed, which they are not. most stablecoins are neither stable nor coins. decentralized finance is often quite centralized.