francois villeroy de galhau : france and germany facing european challenges in the crisis speech by mr francois villeroy de galhau, governor of the bank of france, at the bundesbank conference “ banking and payments in the digital world ”, berlin, 11 september 2020. * * * ladies and gentlemen, 1. to this day, the coexistence and complementarity of central bank and commercial bank money as settlement assets has structured the payment landscape and preserved the stability of the monetary system. yet this structure is increasingly being questioned. • our payment landscape is based on the coexistence and complementarities of central bank money and commercial bank money as settlement assets. their respective roles are clearly assigned : central bank money ensures the stability of the financial system while the multiplicity of issuers of commercial bank money preserves competition and innovation in the provision of financial services. their interplay and their interchangeability at par value ensures the safety and efficiency of the financial system. • however, the balance between these two forms of money cannot be fixed once for all, as it depends on changes in payment habits, the evolution of the financial ecosystem and the emergence of new technologies. • in the retail space, the digitalisation of the economy and the development of cheap, highly effective digital payment solutions displaying innovative features ( e. g. they are instantaneous and more user - friendly ) undergo ( i ) a decline of the use of cash in transactions, which puts into question the availability of central bank money for the public, and ( ii ) an increase of cashless payments which leads to a wider use of commercial bank money. this trend has apparently accelerated since the outbreak of the covid - 19 crisis. • besides, increased reliance on digital payment solutions also exposes how our european ecosystem has become critically dependent on non - european players ( e. g. international card schemes and big techs ), with little control over business continuity, technical and commercial decision - making, as well as data protection, usage and storage. • meanwhile, the development of crypto - assets and of so - called “ stablecoins ” aims to create a new category of settlement assets. stablecoins in particular may compete against both commercial and central bank money, even though they do not offer the same guarantees in terms of credit risk, liquidity, service continuity, and neutrality. • these trends at stake bring both benefits and risks, and we must consider them as a whole. we must acknowledge that

disappear? there are three possible reasons : the second pillar allows a cross check on the analysis of inflation. we could possibly introduce a focus on nominal aggregates, whereas the first pillar focuses by its nature on prices and volumes. finally, it would allow reference to some of the “ secondary ” objectives of the ecb, including financial stability. in our discussion to come, i believe we could study two types of aggregates : page 7 sur 10 financial aggregates, from the perspective of financial stability, and potentially looking more closely at the assets of financial institutions including non - banks ( such as their provision of credit in the broadest sense ) rather than at their liabilities only ( including money, as in the past ). other economic aggregates, starting with nominal gdp, which has the virtue of combining real growth and prices – two variables that statisticians sometimes have difficulties separating in our measures. but also employment and income distribution, which respond to the demands of the treaties as well as to the expectations of the public. allow me some remarks on the substance of these “ secondary ” objectives. to achieve financial stability, in an ideal world, we would have a box of macroprudential tools that could maintain financial stability whatever the monetary policy stance. however, in practice our set of macroprudential tools is comparatively limited. we need a monetary policy strategy that reflects this reality. we should go beyond the old debate of “ separation principle ” versus “ leaning against the wind ”. i advocate a median way, which we could call “ coordinated ” or “ integrated ”. viii we have now a range of unconventional monetary instruments and our objective should be to pick the right combination that delivers the necessary accommodative monetary stance while minimizing of adverse side - effects on financial stability. tltro ’ s and the tiering system we use today for refinancing the eurozone banks are two good examples in this respect. on climate change, the emphasis put by christine lagardeix herself is welcome and totally warranted. in my view, the fight against global warming is already an imperative for us under our price stability mandate : not only will the effects of climate change have significant repercussions on future inflation and growth, but they are already having an impact now. we could implement our climate decisions in no more than 3 to 5 years, which would make us pioneers among major central banks. page 8 sur 10 4. how to improve communication with the general public