lending to the economy even if truly adverse scenarios materialise, as shown by the ecb ’ s vulnerability analysis published in july 2020. this shows that in the field of banking regulation, we did not waste the previous crisis and learnt our lessons well. my second point relates to regulatory response. the relief package that the ecb banking supervision announced in march was designed to ensure that banks can keep lending to the contracting economy. for instance, banks were allowed to temporarily operate below the level of capital defined by the bank - specific pillar 2 capital requirements, namely pillar ii guidance. 1 / 2 bis central bankers'speeches in lithuania, macroprudential policy was a key domain of the regulatory response package. prior to 2020, critics would say that our macroprudential set - up was perhaps too wide - ranging. but this crisis showed, i believe, that our policy stance was the right one. first, it helped prevent a deterioration in lending standards and a build - up of systemic risk in the run up to the covid - 19 shock. and second, when the time came, we implemented countercyclical policy decisions in line with the intended functioning of the framework. for instance, in mid - march, the bank of lithuania fully released the counter - cyclical capital buffer from 1 % to 0 %. overall, the relaxation of various requirements has increased the lending potential of banks in lithuania by €2 billion, or by a third, compared to 2019. of course, we are talking about potential here, not the real world. but the real - world data has been encouraging, at least in terms of lending to households, which has broadly returned to the pre - pandemic levels. going forward, policymakers should not “ waste a good crisis ” this time as well, and take a fresh look at the existing macroprudential framework. we could even consider novel ways of applying macroprudential tools – such as the application of borrower - based measures during the cycle, e. g. relaxing the loan - to - value or debt - service - to - income requirements in times of crisis. finally, i would like to make a point on the long - term issues of the european banking sector. the first issue here is inadequate bank profitability. in this regard, there is a need for consolidation via mergers and acquisitions to make the european banking sector leaner. completing the banking union by creating a european deposit insurance scheme ( edis ) would open doors for true

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