claudia buch : evolving risks – evolving supervision speech by prof claudia buch, chair of the supervisory board of the european central bank, at the bundesbank symposium " bundesbank im dialog ", frankfurt am main, 12 june 2024. * * * thank you very much for the invitation to speak at this year's symposium " bundesbank im dialog ". for more than 25 years, this symposium has been a key forum in germany, facilitating a dialogue between relevant stakeholders. this dialogue is particularly important at the current juncture. the environment in which banks operate has changed significantly in recent years. several major shocks, including the covid - 19 pandemic, the russian invasion of ukraine, the energy crisis, the increase in inflation and the turbulence on international banking markets in march 2023, have had profound economic and societal effects. climate change and nature degradation require deep structural changes in the economy and affect the risks banks are facing. digitalisation and the market entry of new financial institutions are changing the competitive nature of banking markets. in addition, heightened geopolitical risks are having an impact on the post - war global institutional order and international economic relations. 1 all of this triggers structural changes in the real economy and the financial system – changes that will take time to fully materialise and whose final effects are highly uncertain. these evolving risks mean that supervision also has to evolve, and it is evolving. this year, we are celebrating the tenth anniversary of european banking supervision, which is the first pillar of the banking union. the banking union was a direct response to the global financial crisis and the european sovereign debt crisis. the increase in cross - border banking activity and the risk of contagion, both across borders and between banks and sovereigns, meant that supervision in europe needed to be harmonised. in its first ten years the single supervisory mechanism ( ssm ) has delivered effective supervision in the euro area through a common, consistent supervisory framework building on national best practices. in the case of germany, its 25 significant banks are now directly supervised by the ecb. but national supervision continues to play a significant role. the ecb and national supervisors work together in joint supervisory teams ( jsts ) led by the ecb. less significant institutions ( lsis ) remain under national supervision while the ecb has an oversight function. for germany, this means that the federal financial supervisory authority / bundesanstalt fur finanzdienstleistungsaufsicht

you can see that a lot can be done already. some measures might also be taken without huge or difficult legal changes. could you give us an example? our collateral framework, our platform where we are an operator, we have our payment systems, we are in the midst of discussing european framework for ccps — these are all areas where there is still time and where a certain amount of legislation is still under review, so we could add it. would you be ready to abandon your tips initiative in favor of a blockchain / dlt based solution? the conclusion to your stella project with boj says “ dlt - based solution could meet the performance needs of current large value payment systems ”? tips is 10 seconds, 0. 2 cents. dlt transactions are at best 30 euros and take at least one hour. why would we abandon tips? we have a mandate for efficient payment systems, and we go for efficiency. we are not bound to a technology, we are bound to results, and i think it ’ s the result that counts. as to the technology of dlt, we are testing it but there are so many unsolved questions in terms of governance and legal certainty in dlt. we are looking to what extent we could overcome these legal barriers, but we are at a very early stage. there seems to be a certain change of tone in how you and your colleagues now speak about digital currencies. in the past some of your colleagues largely dismissed it as, for example, tulip mania with no immediate consequences for the central bank. what prompted this bigger sense of urgency that something needs to be done right now? as long as it was negligible it was not considered a priority, but since this hype accelerated at the end of last year it has moved higher up on the agenda. if you see how fast something can develop, it can very quickly reach dimensions of past bubbles that also had negative effects on the economy. that we cannot ignore. the valuations are not at a level where you would now jump from your chair and say “ you need to forbid this thing ”. we are not there. but what i do not like is the public hype driving this thing. also the amount in icos is rather small. but this is market integrity, this is protecting the consumer. here you can ’ t say it ’ s also affecting monetary policy. one thing to remember is also that we target asset bubbles if they are a risk for financial