in the emergence of peer - to - peer lenders and technology firms offering banking services. there is also increasing competition in banking services more generally, as firms like paypal become well - established in markets like retail payments that were previously the preserve of high street banks. on top of this, the trend towards more capital market - based financing in europe – supported by the new initiative on capital markets union – will inevitably weaken banks ’ market power, especially for firms that can easily substitute bank and market finance. and though still relatively small in quantitative terms, we are also seeing a greater role of “ shadow banks ” in direct lending – asset managers, pension funds, private debt funds – that heralds a shift towards a less bank - dominated financing mix. taken together, this represents a uniquely challenging environment for european banks, and this is visible in their generally weak financial performance : price - to - book ratios are low and profitability is meagre. many banks have a cost of equity exceeding their return on equity. bis central bankers ’ speeches moreover, there is little chance of the economy coming to the rescue or of interest rates rising any time soon. banks will have to return to profitability in the context of a slow recovery with depressed net interest margins. so, should we be concerned about how banks will fare in this difficult climate? as i already intimated, in my view we need to take a nuanced stance here that balances principle and practice. in principle, the developments in the banking sector should be largely positive for society at large. many banks grew too quickly before the crisis and developed unsustainable business models, so a period of consolidation is both desirable and inevitable. the aim of the regulatory agenda, which is to make banks more resilient and reduce the burden of bank failure on society, is also fully justified. and the ongoing structural changes are welcome. if we believe in the benefits of creative destruction for normal firms, then we must also believe in it for financial firms. innovation that raises competition in retail lending, and leads to better and cheaper services for customers, is a net gain for the economy. so, a priori, i do not see any role for regulators in protecting banks from new operators – on the contrary, innovation should be nurtured and encouraged. equally, the objective of a capital markets union is clearly in the public interest. it would benefit, in various ways, financial stability, access to finance and entrepreneurship. in particular for equity risk capital

access to digital euro. this would also endanger network effects necessary to the success of a payment solution ( see footnote 9 ). 16. there are lessons to be learned from the delays in achieving pan euro area reach in case of the sepa credit transfers and direct debit schemes and then also the sepa instant credit transfer scheme. if broad access is to be ensured for the digital euro, the required regulatory measures need to be established at an earlier stage in the process. 17. panetta, f. ( 2022 ), “ building on our strengths : the role of the public and private sectors in the digital euro ecosystem ”, introductory statement at the committee on economic and monetary affairs of the european parliament, brussels, 29 september. 18. to avoid placing an additional investment burden on intermediaries, the digital euro scheme rulebook development groupecb hosts first digital euro rulebook development group ( rdg ) meeting is investigating how to leverage existing standards and solutions as much as possible, and how to make the digital euro compatible with existing solutions. it will also reflect on present and future regulatory requirements. see as well as rdg mandate and the related calls for expression of interestscheme compatibility workstream by experts to participate in workstreams ( e. g. ). 19. a compensation model for the digital euro refers to the framework that determines how entities are remunerated for their participation in or use of a digital euro currency. the digital euro compensation model is a four - party scheme with variations concerning three aspects : ( i ) pricing for private individuals, ( ii ) pricing for merchants, and ( iii ) costs for the eurosystem. the model could also cover factors such as transaction fees, interest rates, incentives and other mechanisms for compensating users. see ecb ( 2023 ), “ compensation model for the digital euro ”, presentation at the euro retail payments board, 22 february. 20. ecb ( 2020 ), “ report on a digital euro ”, october. the scope of digital euro basic services is yet to be defined, but it should be similar in nature to the basic services that banks are required to provide under the payment accounts directive. these basic services could therefore include features such as free - to - open digital euro accounts / wallets, payments between individuals, and the funding and defunding of digital euro accounts / wallets. if consumers had to pay for the basic services, it would also put the digital euro at a