technological change had become a pervasive influence on our lives long before i first spoke to this conference in 1998. it continues to be so, and surely it will be a force for the foreseeable future. virtually all industries that have been profoundly affected, and financial services is no exception. i have already mentioned the importance of technological change in improving risk measurement and management at financial institutions as a reason banks have weathered the recent economic downturn. moreover, i fully agree with the many observers who have highlighted the role of technology in breaking down traditional distinctions between commercial banking, investment banking, and insurance products. in this sense, the gramm - leach - bliley act can be thought of as a response to technological change. and, technological change can surely throw us some unexpected curves, as the successfully navigated but hugely expensive adjustments to deal with the century date change showed. i will return in a few moments to the role of technological change in risk measurement and management and its influence on supervisory policy. but first i want to spend a few moments discussing some interesting facets of the impact of change on the technologies used by american households to consume financial services. the process by which technological change becomes embedded in production and consumption has long absorbed the attention of economists. despite this interest, the process remains a considerable mystery, and households ’ use of financial services is no exception. for example, many academics, regulators, and bankers have for many years forecast that technological change would end use of the paper check and make the brick - and - mortar bank branch obsolete. however, here we are in october 2003 and the paper check is still very much in use, the smart card has not succeeded as predicted, and the number of brick - and - mortar bank offices is still increasing. clearly, there is much that we do not understand. i am not here today to propose any definite answers to the question of why households adopt new technologies in financial services more slowly than we sometimes predict. but i would like to present a few facts that we have gathered over time in our triannual survey of consumer finances that shed some light on this complex topic. in 1995, we began asking households about their use of computers to conduct business with their financial institutions. in that year, barely 4 percent of households with a checking account said they used a computer to consume financial services. by 1998, the year of the next survey, the percentage saying they used a computer had risen to more than 6 percent. in contrast, in 1995

have become highly important commercial product and could prompt certain institutions to slash their profit margins in order to win customer loyalty. yet, such practices contribute to rapidly pushing up property prices. thus, having observed that liquidity can disappear very rapidly, that central bank intervention must remain exceptional and that excessive maturity transformation increases systemic risk, a preventive approach is called for. such an approach should take into account two aspects : – i will start by discussing basel iii liquidity regulation, while stressing the fundamental goal : reducing liquidity risk and limiting maturity transformation. – nevertheless, whatever changes are made to the regulatory framework, this necessary but one - size - fits - all approach will still be inadequate if it is not accompanied, or even preceded, by new policies to manage maturity transformation by banks. bis central bankers ’ speeches i. an overview of basel iii liquidity regulation 1. a fundamental goal : preventing excessive maturity transformation risks since banks are in the best position to reduce information asymmetries in credit markets, select and monitor loans and diversify their asset portfolios, they are at the heart of maturity transformation activities. in traditional financial intermediation, banks collect savings and provide liquidity to the whole economy through transactions on their balance sheets. to do this, they transform liquid short - term liabilities into medium - to long - term assets with poor liquidity. this activity generates well - known risks, in particular in terms of interest rates and liquidity. maturity transformation is therefore subject to prudential regulation to ensure that basic security rules are followed. at the seoul summit in november 2010, the g20 leaders endorsed the basel iii framework that overhauls the current prudential regulatory regime. in particular, this is the role of the two new liquidity ratios : – the one - month liquidity ratio or liquidity coverage ratio ( lcr ) has the two - fold objective of preventing short - term liquidity shocks and requiring institutions to selfinsure against liquidity shortages in order to limit refinancing exclusively via the central bank. institutions should in no way consider that they have a guarantee of permanent access to such refinancing. in this respect, the use of foreign currency funding is not always justified by the need to fund assets denominated in these currencies in the absence of a sufficiently broad customer base in the countries concerned. such strategies are also used for arbitrage purposes. they contribute to overall market liquidity but they must remain of a magnitude that allows institutions