to make them safer, rather than more hazardous. wonderfully named features as abs and esc are only possible because of innovation driving growing complexity in car - making. this is the kind of complexity that keeps drivers safe every day. the finance industry also offers us some wonderfully names symbols of complexity, such as rmbs and cds. unfortunately, unlike their counterparts in the car industry, these are not currently associated with safety and reliability. so it is clear that innovation and complexity may have improved the system ’ s ability to allocate capital efficiently in many cases, but certainly not in all. this implies we should go back to the drawing board to improve the resilience of the financial system. but it does not mean we should go back to the past. innovation cannot be undone and the idea that tomorrow ’ s problems can be solved by yesterday ’ s regulation strikes me as overly simple and even dangerous, as it could constrain the possibilities for financial system to allocate capital around the world and transfer risk efficiently. while we are at the drawing board, we also need to address the issue of containing systemic risk. the new financial system as a whole, as well as its individual institutions, will need to be more resilient to shocks. the present - day financial system is a complex system, characterized by a high level of interconnectedness. therefore, monitoring the financial system as a whole, and the linkages between its elements, has become all the more important. such “ macro - prudential ” supervision mechanisms help to spot sources of financial instability at an early stage. a positive development in this regard is the establishment of the european systemic risk board next year. but changes are also at hand to strengthen each financial institution individually. and some of these changes will have a profound effect on the balance between banks and supervisors. managing complexity this brings me back to our topic of discussion. the balance between banks and supervisors. what changes are necessary for individual banks and supervisors, in order to strengthen the resilience of the financial system and manage its complexity? let ’ s start by looking at changes for individual banks. some policy proposals have received ample attention in the debate. in order to make the financial system more resilient to shocks, each individual bank will need to hold a bigger capital buffer than before. this can be achieved through higher overall buffers, increases in capital charges for specific activities, or a combination of the two. furthermore, the quality of capital buffers needs

system. the exchanges where cryptos are bought and sold are where the ‘ new ’ and the ‘ old ’ financial systems overlap, and where we will focus our supervisory efforts. conclusion you still have a full schedule ahead, and i ’ d like to have some time at the end for questions, so now i ’ ll conclude. i have tried to highlight some possible benefits of dlt and blockchain for the financial system. the technology is nascent, yet there are several interesting use cases that signify its potential. central banks are keeping a close eye on new developments, and many of them are experimenting themselves. they also do this to assess and monitor risks stemming from new technologies. we should be especially vigilant about developments in cryptos. while they, too, could represent opportunities, there are considerable risks both for individual investors and in time, possibly the financial system at large. an appropriate regulatory response should be formulated, commensurate with these risks. central banks and regulators need to find the right balance between seizing the benefits of technological innovation on one hand, and coping with possible new risks on the other. for us, blockchain ’ s evolution in the financial system is ultimately a balancing act.