mr george paints a broadbrush picture of challenges and change for the markets as the year unfolds speech by the rt hon eddie george, governor of the bank of england, to the euromoney international bond congress at the qeii conference centre in london on 16 february 2000. * * * it ’ s a pleasure, as always, to have been invited to bring proceedings at this great annual event to a close. you seem to go from strength to strength - from what i hear your sixth congress has been as lively and interesting as its predecessors. lively and interesting are pretty good words to describe the last twelve months in the markets too. when we were together here last year there were still plenty of clouds around. the emerging markets in asia were still only in the early stages of patchy recovery. russia was still fragile and there were real fears of another round of financial upset in latin america, particularly brazil. in the industrial countries, too, the prospects were for slow growth - some were even still forecasting recession. i concluded that we ’ d all need strong nerves in the year ahead. well, by and large we kept our nerve, and the skies have brightened over the past year as the clouds of financial instability and global economic slowdown dispersed. the focus now is not on how we keep the ship afloat but how we keep her on a steadier course - which, if you ’ re a sailor is a comparative luxury. that still leaves us with quite enough to worry about - and who ever met a central banker - or a sailor - who didn ’ t worry about what was coming next - it would be a contradiction in terms. the immediate challenge is to cope with the imbalances within and between the industrial countries, and we have more work to do to improve our defences against volatile international capital flows more generally. but for the time being, the rate of world output growth, which had fallen to only about 2 % in 1998, about half its long - term trend rate, and which was widely expected to fall further, is now expected to bounce back to around trend over the next couple of years. and whereas, a year ago, many industrial countries were still in the process of easing monetary policy, to offset the impact on world demand of the interruption of the flow of credit and investment to emerging market countries and transition economies, we have recently seen a quite widespread increase in interest rates, designed to moderate the pace of domestic demand growth. and rising interest rates - i

of intermediaries. [ 22 ] ( and all this was coordinated by a ‘ synchronisation operator ’, which – now probably stretching my analogy to breaking point – is akin to managing the train timetable so that money and assets move on different rails at the same time. ) meanwhile, some other central banks are experimenting with going further, tokenising central bank money themselves on a separate, distributed ledger – so - called wholesale cbdcs. [ 23 ] the question we are keen to consider is how these different models for central bank infrastructure compare, including whether there are important differences in the payment use cases they can support. the evolution of wholesale payments will also be relevant to our consideration of a retail cbdc, since both could help support the future uniformity of money in the uk. today, the equal value of money issued by different banks is supported not only by being able to convert them one - for - one into cash, but also by payments between those banks settling across the books of the central bank, in reserves, through rtgs. [ 24 ] similarly, as the technology underlying privately issued money evolves ( whether through tokenised bank deposits or regulated stablecoins ), this uniformity of money could potentially be bolstered not just by retail cbdc, but also by enhancing the bank of england ’ s wholesale payments infrastructure so that it can continue to play its key role in supporting settlement between these new forms of private money. payments innovation by banks i want to finish on what the coming wave of technology innovation in payments means for commercial bank deposits – which of course support the vast majority of retail payments in the uk at present. as andrew bailey said in his call to action at mansion house last year, we don ’ t want the central bank to be left as the only game in town when it comes to payments innovation. [ 25 ] in addition to our exploratory work on retail cbdc and our proposed regime for regulated stablecoins, we want to encourage more thinking and, crucially, action by banks in payments innovation. that needs to cover trains and rails – both how tokenisation might be applied to bank deposits to enhance their functionality across the full range of retail payments use cases, and what interbank payment rails would be needed to support this. i am firmly of the view that the technology revolution will hit – indeed, is hitting – finance in the way that it has hit other sectors of the economy. it strikes me that, for banks ( as