as a result of more profitable business lines being targeted by new competitors. at best, those that do not respond to these threats effectively, including those that back the wrong horses, may be reduced to the role of utilities, with lower income and higher costs due to legacy infrastructure and capability issues ; at worst, some incumbents may fail altogether. these risks may well result in the demise of certain types of business model and categories of financial service providers. a byproduct may be loss of access to critical financial services for some cohorts of society. the former may be acceptable and even desirable, if the externalities of failure can be managed. the latter may be highly problematic in relation to consumer welfare and the implications for social cohesion. technological innovations may also generate new risks for consumers in relation to innovations in the marketing and delivery of financial services that result in new categories of mis - information and mis - selling. risk exposures in the handling and storage of customer data also pose a challenge for both new entrants and existing firms. accordingly, technological change presents multiple operational risks, both in relation to the intrinsic characteristics of some new technologies and in terms of implementation risk. higher probability but lower impact human risks are being replaced by lower probability but higher impact technology risks associated with operational failures and the threat of devastating cyber crimes. bis central bankers ’ speeches 4. preparedness it is difficult to manage and mitigate the diverse risks associated with this uncertain environment. as a regulator, our experiences regarding the awareness and preparedness of regulated firms for this changing environment are mixed. it is clear that some firms are considering these risks in a coherent, considered and appropriate way and are embracing the technological opportunities in a calibrated manner. however, many other firms, including some of the entities that have been damaged by the crisis and are still dealing with the legacy issues of the past, are less well prepared, perhaps less able to invest in new technologies to improve processes and reduce costs and, consequently, less able to cope. the fundamentals of running businesses well and in a prudent manner will remain critically important as the financial services sector continues to evolve. strong governance, clear strategic planning, effective and embedded risk management, and the careful shepherding of resources are vitally important in times of innovation as in times of greater stability. regardless of the future shape of the financial services sector, lessons from our most recent financial crisis will remain critical and must inform our policy framework and policy actions into the future. role

in any detail. bis central bankers ’ speeches in conclusion, the challenge for policy makers is to understand and attempt to appropriately regulate the evolving financial services landscape, while at the same time balancing oftencompeting objectives of competition and choice, financial stability, and the effectiveness of macroeconomic policies. we remain vigilant and alive to these challenges, just as we expect a similar attitude from our regulated firms. to state this is easy, to deliver more difficult. i wish you all well in your endeavours in navigating this phase of technological innovation in financial services. acknowledgements : i thank anna lalor, anne - marie mckiernan and ed sibley for their inputs into this speech bis central bankers ’ speeches