25.09.2020.

Latvijas Banka's conference "Money and public security"

On 25 September 2020, Latvijas Banka hosted its annual economic conference to discuss the development of payment technologies, their impact on public security and the ways it could be strengthened.

  • About Conference

    Taking account of the measures to contain the spread of the COVID-19 pandemic, the international conference "Money and public security" was organised mostly remotely. Most speakers as well as the audience participated in the conference by taking advantage of modern video conference technologies. Anyone interested was able to watch the conference live on the website makroekonomika.lv and news portals as well as had the opportunity to engage in discussions and ask questions to leading international and Latvian experts in the fields of finance and security (on the platform sli.do, code #LBconference).

    Krišjānis Kariņš, Prime Minister of the Republic of Latvia, addressed the conference participants and those watching, and the keynote speech was delivered by Benoît Cœuré, Head of Innovation Hub, Bank for International Settlements.

    Two panel discussions were held: "Challenges in the age of new high-convenience real-time payment technologies" and "Tomorrow offers digital money in digital wallets".

    The discussions sought answers to the following questions:

    • What are the risks entailed by the rapid development of new payment technologies?
    • What is the role of the state and the central bank, when the availability and acceptance of digital money becomes more widespread?
    • Are the new payment technologies robust in case of power outages or data flow interruptions?
    • What can we do to ensure proper protection of personal or confidential data?
    • Are we heading for a cash-less economy?
    • What is the role of cash as a means of payment and a store of value in light of new payment techniques?
    • What is the impact of the demise of cash – in terms of payment availability, convenience, public security, privacy?
    • What is digital money and what makes it different from other types of money?
    • Why do we need digital money? 
    • Should digital money be private or public? 
    • How can the creation of digital money intended by private global businesses affect each of us – both in terms of settlement, the economy and the economic security of the state and society?
    • What impact will the issuance of digital money by the state, central banks have on savings, lending, price stability, crises resolution? 
    • What new risks are expected to emerge upon the introduction of digital money and how would the current ones change?

    The moderator of the panel discussion "Challenges in the age of new high-convenience real-time payment technologies" was Niels Henrik Bünemann, communication specialist and freelance journalist. The opening presentation was delivered by Deniss Fiļipovs, Head of Payment Systems Policy Division, Latvijas Banka, and the discussion participants were Benoît Cœuré, Harijs Ozols, Head of Information Technology Department, Latvijas Banka, Jānis Sārts, Director, NATO Strategic Communications Centre of Excellence, Karsten Biltoft, Assistant Governor and Head of Financial Market Department, Danmarks Nationalbank, and Prof. Dr. Franz Seitz, Weiden Technical University of Applied Sciences.

    The moderator of the panel discussion "Tomorrow offers digital money in digital wallets" was Mārtiņš Kazāks, Governor, Latvijas Banka, and the opening presentation was delivered by Tommaso Mancini-Griffoli, Division Chief of Payments, Currencies and Infrastructure Division, IMF. Ulrich Bindseil, Director General of Market Infrastructure and Payments, European Central Bank, Marius Jurgilas, Member of the Board, Lietuvos bankas, and Liza Aizupiete, Managing Director, SIA Fintelum (tbc), also participated in the discussion.

  • Programme

    ECONOMIC CONFERENCE. MONEY AND PUBLIC SECURITY

    25 September 2020
    Online
    www.macroeconomics.lv

     

    11.30–11.40

    OPENING OF THE CONFERENCE

    Mārtiņš Kazāks, Governor, Latvijas Banka

     

    11.40–11.45

    ADDRESS

    Arturs Krišjānis Kariņš, Prime Minister of the Republic of Latvia

     

    11.45–12.00

    KEYNOTE SPEECH

    Benoît Coeuré, Head of Innovation Hub, Bank for International Settlements

     

    12.00–13.30

    PANEL DISCUSSION I

    CHALLENGES IN THE AGE OF NEW HIGH-CONVENIENCE

    REAL-TIME PAYMENT TECHNOLOGIES

    • What are the risks entailed by the rapid development of new payment technologies? What is the role of the state and the central bank, when the availability and acceptance of digital money becomes more widespread? Are the new payment technologies robust in case of power outages or data flow interruptions? What can we do to ensure proper protection of personal or confidential data?
    • Are we heading for a cashless economy? What is the role of cash as a means of payment and a store of value in light of new payment techniques? What is the impact of the demise of cash – in terms of payment availability, convenience, public security, privacy?

    Moderator: Niels Henrik Bünemann, communication specialist and freelance journalist

     

    OPENING PRESENTATION

    Deniss Fiļipovs, Head of Payment Systems Policy Division, Latvijas Banka

    Discussion participants

    Harijs Ozols, Head of Information Technology Department, Latvijas Banka

    Jānis Sārts, Director, NATO Strategic Communications Centre of Excellence

    Karsten Biltoft, Assistant Governor and Head of Financial Stability, Danmarks Nationalbank

    Dr.oec. Franz Seitz, Weiden Technical University of Applied Sciences

     

    13.30–14.00

    BREAK

     

    14.00–15.30

    PANEL DISCUSSION II

    TOMORROW OFFERS DIGITAL MONEY IN DIGITAL WALLETS

    • What is digital money and what makes it different from other types of money? Why do we need digital money?
    • Should digital money be private or public? How can the creation of digital money intended by private global businesses affect each of us – both in terms of settlement, the economy and the economic security of the state and society? What impact will the issuance of digital money by the state, central banks have on savings, lending, price stability, crises resolution?
    • What new risks are expected to emerge upon the introduction of digital money and how would the current ones change?

    Moderator: Mārtiņš Kazāks, Governor, Latvijas Banka

    OPENING PRESENTATION

    Tommaso Mancini-Griffoli, Division Chief of Payments, Currencies and Infrastructure Division, International Monetary Fund (IMF)

    Discussion participants

    Tommaso Mancini-Griffoli, Division Chief of Payments, Currencies and Infrastructure Division, IMF

    Ulrich Bindseil, Director General of Market Infrastructure and Payments, European Central Bank

    Marius Jurgilas, Member of the Board, Lietuvos bankas

    Liza Aizupiete, Member of the Board, SIA Fintelum

     

    CLOSING OF THE CONFERENCE

  • Speakers and moderators

    SPEAKERS AND MODERATORS OF THE CONFERENCE

    OPENING OF THE CONFERENCE

    Mārtiņš Kazāks Mārtiņš Kazāks is Governor of Latvijas Banka as of December 2019. Before that, from August 2018, he was a Member of the Council of Latvijas Banka. In his capacity as Governor of Latvijas Banka, he is a Member of the Governing Council of the European Central Bank (ECB) and the General Council of the ECB. Mārtiņš Kazāks is the Governor of the International Monetary Fund (IMF) for the Republic of Latvia.

    From 2014 to 2018, he was a Member of the Fiscal Discipline Council of the Republic of Latvia. From 2006 to 2011, he was a Member of the Strategic Analysis Committee of the President of the Republic of Latvia. Since 2005, Mārtiņš Kazāks was Chief Economist of Swedbank AS in Latvia, and since 2010, also Deputy Chief Economist of the Swedbank Group. Mārtiņš Kazāks has lectured at the Stockholm School of Economics in Riga (1996–2008), the University of London, Riga Stradiņš University and Riga Business School.

    Mārtiņš Kazāks holds a PhD in economics (2005) and a MSc in Economics (with distinction; 1997) from the University of London, a Diploma in Economics from the University of Cambridge (1996) and a BSc in Economics from the University of Latvia (1995).

     

    OPENING REMARKS

    Arturs Krišjānis Kariņš Arturs Krišjānis Kariņš is Prime Minister of the Republic of Latvia since 2019. He was a Member of the European Parliament from 2009 to 2019. In 2007 and 2008, Arturs Krišjānis Kariņš was the Chairman of the New Era party. He was Minister for Economics of the Republic of Latvia from 2004 to 2006 and a Member of the Saeima of the Republic of Latvia from 2002 to 2009.

    Arturs Krišjānis Kariņš holds a BA degree (1988) and a PhD (1996) in Linguistics from the University of Pennsylvania.

    KEYNOTE SPEECH

    Benuā Kerē  Benoît Cœuré is Head of the Innovation Hub of the Bank for International Settlements (BIS). He is a Member of the BIS's Executive Committee. From 2012 to 2019, Benoît Cœuré was a Member of the Executive Board of the ECB. From 2013 to 2020, he chaired the BIS's Committee on Payments and Market Infrastructures.

    Prior to joining the ECB, he served in various positions at Agence France Trésor and Debt Management Office. Between 2007 and 2009, he was France's Assistant Secretary for Multilateral Affairs, Trade and Development, Co-chair of the Paris Club, and G8 and G20 Finance Sous-Sherpa for France. From 2009 to 2011, he was Deputy Director General and Chief Economist at Agence France Trésor.

    Benoît Cœuré is a graduate of the École Polytechnique in Paris. He holds an advanced degree in Statistics and Economic Policy from the École Nationale de la Statistique et de l'Administration Économique and a BA in Japanese. He has authored many articles and books on economic policy, the international monetary system and the economics of European integration.

    PANEL DISCUSSION I. CHALLENGES IN THE AGE OF NEW HIGH-CONVENIENCE REAL-TIME PAYMENT TECHNOLOGIES

    Nilss Henriks Bīnemanis Moderator Niels Henrik Bünemann is an independent consultant specialised in communication strategies and their implementation. Currently based in his native Denmark, he deals with various communication issues primarily in the fields of economics and finance and to a lesser extent in other areas, such as politics and culture. Prior to his current role, he was Head of Communications and Sales at one of Denmark's most popular art museums.

    From 1999 to 2014, Niels Henrik Bünemann held the position of Principal Press Officer at the ECB and was closely involved in developing and implementing the ECB's communication strategy. He has managed numerous ECB's projects and given lectures on central banking activities in diverse fora across Europe. In 2008, he was on a one-year secondment to the Media Relations Division of the IMF in Washington, DC where he was responsible for media relations in Africa, the Middle East and Central Asia. He is now a member of the IMF external experts roster.

    Earlier in his career, Niels Henrik Bünemann was employed as a financial journalist and foreign correspondent by the Danish business daily Børsen and later by the Danish public service television station TV2. Niels Henrik Bünemann holds an MSc in Economics from Aarhus University, Denmark.

    OPENING PRESENTATION

    Deniss Fiļipovs Deniss Fiļipovs started to work at Latvijas Banka in 2011 as a Payment and Financial Market Analyst with the focus on payments policy, development and innovation. Since 2015, he is the Head of Payment Systems Policy Division of the Payment Systems Department with the responsibility for oversight of payment systems and payment instruments in Latvia and Europe. That also includes the monitoring of the trends in fintech and analysing the impact of the new technologies on the financial market infrastructure. He participates in the instant payments project of Latvijas Banka. Deniss Fiļipovs is an expert in the area of virtual currencies and facilitates discussion about the high potential of the blockchain technology. He holds an MSc in Business Economics from Riga Technical University.

    DISCUSSION PARTICIPANTS

    Harijs Ozols Harijs Ozols has been the Head of the Information Systems Department (renamed Information Technologies Department in 2020) of Latvijas Banka since 1997 and is responsible for the establishment, functioning and development of the information systems and telecommunications infrastructure required for the operation of Latvijas Banka. From 2002 to February 2020, he was a Member of the Board of Latvijas Banka and was overseeing the operation of payment systems and the Credit Register, as well as operational risk management. He also managed major development projects, inter alia the establishment and development of the Credit Register and introduction of the Instant Payments service. From 1994 to 1997, Harijs Ozols served as the Deputy Head of the Information Systems Department of Latvijas Banka. From 1992 to 1994, he worked at Latvijas Banka as a Senior Programmer and the Head of the Programming and System Implementation Group. Harijs Ozols represents Latvijas Banka on the Information Technology Committee of the European System of Central Banks. Harijs Ozols holds a professional MSc in Software Engineering and Programming from Riga Technical University.

    Jānis Sārts  Jānis Sārts is Director of the NATO Strategic Communications Centre of Excellence (Riga), a multinational, cross-sector organisation providing comprehensive analysis, advice and practical support in strategic communication to the Alliance and the allied nations. Prior to that, he was State Secretary of the Ministry of Defence of the Republic of Latvia for more than seven years, implementing defence sector reforms during the economic crisis, developing a new state defence concept and encouraging regional defence cooperation within NATO and the EU. In his capacity as Chair of the National Cyber Security Board, he was responsible for formulating and overseeing the implementation of Latvia's cyber security policy as well as for overseeing the work of the National Information Technology Security Incident Response Institution CERT.LV.

    More information

    Karstens Biltofts Karsten Biltoft has been working at Danmarks Nationalbank since 1998 and is currently its Assistant Governor and Head of Financial Stability (since 2015). Prior to that, he was Head of Administration (2007–2015), Head of Secretariat (2004– 2007) and Head of Payment Systems (2000–2004). Karsten Biltoft also worked as External Expert in Payment Systems and Securities Settlement in IMF missions in Slovenia, Malta and Russia (2000–2004), and as Administrator/Economist at the OECD (1994–1997). Karsten Biltoft is a Member of the Governing Board of the Danish Financial Supervisory Authority, Alternate Member of the Danish Systemic Risk Council, Chairman of the Financial Sector Forum for Operational Resilience and Member of the ECB's Market Infrastructure Board.

    He has completed the Advanced Management Programme (AMP) at INSEAD (2003), holds an MSc in Economics from Copenhagen University (1988). He has also studied at the London School of Economics and Political Science (1987) and University of California (1980–1981).

    Francs Zeics Dr.oec. Franz Seitz teaches Economics with a special focus on monetary policy and financial markets at Weiden Technical University of Applied Sciences (Germany). He is an author of numerous articles published in national and international journals. His main fields of research are monetary theory and policy, financial markets, banking and payments markets, particularly cash in circulation. For many years now, Franc Seitz has been acting as a consultant in different projects for central and commercial banks as well as for financial and non-financial corporations.

    PANEL DISCUSSION II. TOMORROW OFFERS DIGITAL MONEY IN DIGITAL WALLETS

    Mārtiņš Kazāks Moderator Mārtiņš Kazāks, Governor of Latvijas Banka


    OPENING PRESENTATION

    Tommaso Mancini-Griffoli Tommaso Mancini-Griffoli is Division Chief of the Payments, Currencies and Infrastructure Division at the International Monetary Fund (IMF). His work focuses on digital currencies and fintech, monetary policy, foreign exchange interventions, modelling, as well as central banking operations and communication. He has advised country authorities and published widely on these topics. Prior to joining the IMF, Tommaso Mancini-Griffoli was Senior Economist in the Research and Monetary Policy Division of the Swiss National Bank, where he advised the Board on quarterly monetary policy decisions. He spent prior years in the private sector, at Goldman Sachs, the Boston Consulting Group and technology startups in the Silicon Valley. He holds a PhD from the Graduate Institute in Geneva and prior degrees from the London School of Economics and Stanford University.

    OTHER DISCUSSION PARTICIPANTS

    Ulrihs Bindseils Ulrich Bindseil has been Director General of the ECB's Directorate General Market Infrastructure and Payments since 1 November 2019. Previously, he was Director General of the ECB's Directorate General Market Operations (since 2012). He served as Deputy Director General of the same Directorate General (from 2009) and prior to that headed the ECB's Risk Management Division (between 2005 and 2008). Ulrich Bindseil started working in the field of central banking in 1994 in the Economics Department of Deutsche Bundesbank after completing his studies in economics. His publications include Monetary Policy Operations and the Financial System (Oxford University Press, 2014) and Central Banking before 1800 – A Rehabilitation (Oxford University Press, 2019).

    Marjus Jurgils Marius Jurgilas has been Member of the Board of Lietuvos bankas since 2013. His fields of responsibility include supervision, payment systems and research. He is one of Europe's foremost thought leaders on the future of banking and considered the godfather of fintech. Marius Jurgilas is an expert in the topics of innovation and regulation, the European fintech ecosystem and the Lithuanian fintech. He has worked as Economist at Norges Bank (2011–2013) and the Bank of England (2008–2011), Assistant Professor at the University of Elon (2007– 2008), lecturer and research assistant at the University of Connecticut (2001– 2007) as well as researcher at the ECB since 2006. He is also a Member of the Senate of the University of Management and Economics (Lithuania) and has given presentations at international events and interviews to mass media providing an insight into the future of fintech.

    Marius Jurgilas holds a PhD in Economics from the University of Connecticut (2007), MSc in Economics from the University of Connecticut (2003) and a BSc in Economics from Vilnius University (2001).

    More information

    Liza Aizupiete  Liza Aizupiete is a Member of the Board of SIA Fintelum (Managing Director of a crowdfunding platform, which serves the burgeoning crypto capital markets industry). Previously, she was a founder a cryptocurrency exchange Globitex and Chair of the Board and a Member of the Council of AS Globitex Holding as well as General Director of Lithuanian e-money institution UAB NexPay. Liza Aizupiete has graduated from the University of Geneva, majoring in philosophy. She is an entrepreneur, experienced in the financial industry, including trading, fund and portfolio management. Since 2012, she has been passionate about bitcoin and later crypto industry at large, a proponent of a decentralised and sound monetary system.

    More information

  • Articles

  • Presentations

  • Photos

    Konference "Nauda un sabiedrības drošība"

  • Full video of the conference


    Panel discussion I
    Challenges in the age of new high-convenience Real-time payment technologies


    Panel discussion II
    Tomorrow offers digital money in digital wallets

     

  • Mārtiņš Kazāks, Governor,Opening of the conference

    Video

    Ladies and Gentlemen!

    Big changes rarely happen overnight. Sometimes they even go unnoticed.

    But looking back we can almost certainly see all the milestones and road signs signalling the turns.

    I find the today’s conference quite symbolic: we are discussing digitalisation of money and the format of the conference is also fully digitalised this year.

    This is the year when the world stayed home. Staying at home is quite all right if you make good use of the time: see what must be improved, change the perspective and come out stronger.

    COVID-19 has been a massive catalyst to processes previously considered, but seemingly quite far from their practical implementation. Many organisations, Latvijas Banka included, had, indeed, looked at teleworking as a future option. Then came March and practically everybody was teleworking from day one. COVID-19 has accelerated processes in many areas. The world in general and the financial world in particular have become more digitalised. Not only practically “right now right here”, but most importantly in terms expectations regarding the pace of change. We have reached a certain point and I do not think there is any chance of going back.

    Two years ago, Latvijas Banka’s annual conference was titled "Payments of the 22nd century: future starts today". At that time, our experience with instant payments was quite modest, yet we had a strong belief that the future lies with instant payments. We were right and they have become the new normal today. Particularly in Latvia, where instant payments are available to more than 90% of bank customers and they are charged similarly to traditional payments. Many may even find it hard to remember the life before instant payments. The same is now becoming true of mobile payments. At our conference two years ago, we were discussing central bank digital currencies and a digital euro as a distant future uncertainty or certainty, depending on the discussant’s point of view.. Today central bank digital currencies, hopefully, to be joined by a digital euro, are virtually on our doorstep. My personal view is that digital euro is not about if it will happen, but when and how it will be designed to accommodate the technical requirements one needs a digital currency to perform.

    Two weeks ago, President of the ECB Christine Lagarde said the following at the Deutsche Bundesbank conference:

    "Here at the ECB, it is our duty to ensure that people have access to riskless, low-cost means of payment, as well as state-of-the-art payment services that reflect our changing economy."

    Christine Lagarde stressed that Europe should develop the autonomy of its own payment system and consider the implementation of a safe digital currency. It is critical for our future economic growth, well-being of our citizens as well as sovereignty of Europe and its international standing. I fully subscribe to this. Yes, it is our duty and we shall do it.

    Ladies and Gentlemen,

    To have a vision, there should be ambition. And I want our ambition in the area of payment systems and digital means of payments to be crystal clear: we want it faster, we can do better. Europe has fallen behind the curve. Europe is a heavyweight of the global economy, alas, underusing its potential. We must run faster. It is never easy for a heavyweight to run fast, yet giving up is not an option.

    At the same time, we should also realise that any new developments involve risks. Therefore, the title of this year’s conference is "Money and public security". There are many questions that haven't been even put into words yet. Today is an attempt to look at some of them, because asking the right questions is half of the solution..

    New developments open brand new opportunities, but also bring in risks. Some of such risks is data protection at an individual level and geopolitical concerns at the community level. Convenient financial services provided by say BigTechs, probably also their digital currencies, may seem quite tempting to all of us. But can we expect such global companies always act in the interests of our people? How would such actors act in a crisis when monetary policy is supposed to help us getting through the storm? Can we risk putting our future in the hands of somebody else? I do not think so.

    There are many other topical issues to be considered: Are the payment systems resilient to technological failure or cyber-attacks? How to close digital skills gaps? What is the role of cash? Is cash about to disappear? Do we need a digital euro?

    These are some of the questions that central banks cannot and should not be answering on their own. Discussions with citizens and the private sector are important. Involvement of citizens and private sector is critical.. Private sector initiatives should be able to integrate with central bank solutions, including central bank digital currencies (when they come). They are complements, not substitutes.

    Monetary policy, payment systems and digital currencies are complicated mechanisms, and only a small part of population do understand them. But all of us use them.

    This is exactly why central banks have a duty to engage and find the ways of addressing a wide audience. They must speak about those subjects in a way that is easy to understand. And central banks are in a good position: they enjoy high reputation and public trust because of their independence, which means that they can speak up and be heard.

    And more importantly, listen to those affected by the change. We must find the best solutions together with the population, public institutions and the private sector.

    The field of payments is one of Latvijas Banka's strengths. My sincerest compliments to my colleagues who have made it into the backbone of Latvia's payment system. Saying that in certain segments we are at the cutting edge of payment innovations in Latvia and Europe in general, is no exaggeration. Our instant links that enables payments by indicated mobile phone number only is used also by the Estonian banks.

    At the same time, I would like to make it clear that cash and digital currency are by no means mutually exclusive. It's an "and" rather than an "or". Cash and non-cash are equally important. They are complements, not substitutes. At least for the time being. Cash will remain an important factor of economic gravity and public security in a foreseeable future. This means that availability of cash will be an essential issue.

    And finally,

    I would like to dwell briefly on the concept of a public good. What is the public contribution of Latvijas Banka, as we perceive it?

    We are using our in-depth economic expertise to help decision-makers. We are educating the general public about sound management of personal finances. Among many other tasks, we are providing cash and payment systems, enabling the economy at large to feel safer and reduce turbulences.

    Monetary policy is a public good, although sometimes not exactly self-evident. People do not always notice the foundation of things. But a strong and resilient foundation helps the society to be better prepared for future challenges and makes Latvia and the euro area as a whole stronger.

    The euro is Latvia's currency. The euro is a global currency. We must make the full use of it, as it lets Europe to maintain its sovereignty and be globally competitive.

    I would like to thank all speakers and participants of this conference for finding the time to join us. Your contribution is highly appreciated, and I know that the many truly high-level participants joining us today will help us to make progress in this long, sometimes bumpy, but always exciting journey. Let us switch on the high beams, illuminating the road far ahead and enabling safe trip forward!

    Growth, sovereignty, security - these are big concepts and ambitious goals of national significance that might be only achieved by joint effort of all stakeholders. I am honoured to give the floor to His Excellency  Prime Minister Artūrs Krišjānis Kariņš.

  • Address of Arturs Krišjānis Kariņš, Prime Minister of the Republic of Latvia

    Video

    Good day to everyone!

    I would like to welcome you virtually to Riga – the capital of Latvia, the heart of the Baltics. Today, you will be speaking about money and public security. One thing I would like to note is that we live in the world of change. I think, if I had said this 200 years ago, it would have been true, if I had said this 1000 years ago, I think, it would have been true, and if I were to say it in 20 years' time, it would still be true. "The only thing that is constant is change." I don’t know who said that first but we all know that this really is true. If we look at the currency we use today in Latvia, the euro, it feels and it seems that we have had the euro for a very long time. It has, actually, only been 6 years, a little more than 6 years, and the euro as cash currency has only been around for about 18 years. So it is very clear that change is ongoing, it is quite rapid. We are now also moving to the world of digital currencies, and, certainly, this is another change which many people simply do not yet appreciate or understand. So, I certainly find the topic that you are discussing today very timely and extremely interesting. I wish you success in your debates today, and I certainly hope that you will come to new, fruitful realisations, that are not only useful for central bankers, but could also be useful for governments and government policy making.

    All the best!

  • Keynote speech by Benoît Cœuré

    Video

    Catalysing change: central banks and digital innovation

    Keynote speech by Benoît Cœuré
    Head of the Bank for International Settlements Innovation Hub
    Latvijas Banka Annual Economic Conference 2020
    25 September 2020

    Introduction

    Mr. Governor, distinguished guests, ladies and gentlemen,

    It is a pleasure to join you virtually today at your annual economic conference on this very timely and important topic of money and public security.

    The year 2020 will be remembered as one of the most serious health crises and global economic contractions in almost a century. Along with many other regions, the shock to the euro area has been particularly severe. In just two quarters, the euro area is estimated to have lost as much output as it has gained over the last 15 years. [1]

    The swift emergency actions taken by governments and central banks to mitigate the immediate impact on the real economy through extraordinary fiscal, monetary and prudential measures have stabilised what could have been catastrophic for global markets. [2]

    These actions reinforce today’s conference theme, that public security and universal livelihoods are inextricably linked to the public provision of money. Here, I refer to the central bank’s critical role in ensuring that “money makes the world go round” – that is, safeguarding continued trust in money as a means of payment, a store of value and as a unit of account, a core public good for the economy at large.

    But the pandemic has also shown that while central banks continue to safeguard essential trust in money, it is technology that enables our globally connected world and the provision of money to go round. Technology has been indispensable in helping to mitigate the economic and social impact of the Covid-19 crisis. Technology has enabled economic activity to continue at arm’s length and partially overcome social distancing protocols.

    In many respects, the current crisis has therefore been a catalyst for forcing us all to take stock and to rethink the rules of the game. New ways of working that were previously thought of as a fallback option are now seen by many of us as the new norm. The ensuing accelerated changes in work and consumption patterns are likely to have a lasting impact on economic relationships. Digitalisation has taken a leap forward.

    These paradigmatic shifts raise important questions that your panel discussions will cover today, and ones that we at the Bank for International Settlements (BIS) have been considering in depth for the last few years. In my remarks today, I would like to emphasise the critical importance of international collaboration in delivering the financial architecture of the future and highlight the role the BIS will play.

    Rethinking the catalyst for change

    While the economic ramifications of the Covid-19 pandemic are still unfolding, the pandemic has accelerated trends in digital innovation that were already well under way. Consumers in many countries have stepped up their use of contactless payments, and as physical stores temporarily closed, e-commerce activity surged. [3]

    Yet, the pandemic has highlighted both progress and shortcomings in payments.

    While access to payment services has increased over time, it is still far from universal. Low-income and vulnerable groups face the greatest difficulty in paying or receiving funds. Costs are relatively high in the retail segment and those costs are not always transparent to end-users. To reach the unbanked, some government-to-person (“G2P”) payments have relied on paper cheques, which take longer to process and may pose higher risks of fraud than bank transfers. Payments across borders are still typically slow, opaque and costly, which is particularly the case for lower-value payments such as remittances. [4]

    There is much scope to improve the quality of payment services in terms of convenience, transparency and speed. However, differences in consumer habits across markets and varying degrees of maturity in banking systems and payments markets may impede localised solutions for greater interoperability or integration. Disparate levels of technological advancement and adoption can also create challenges for cross-border payments and the ability of public authorities to coordinate across jurisdictions. [5]

    One key challenge therefore is how authorities and central banks can use their roles as catalysts and facilitators to spur digital innovation and increase interoperability or integration in cross-border payment services.

    There is certainly no silver bullet, but what is clear is that international collaboration is essential - to support technological capacity, ensure interoperability between national systems, enhance cross-border payments and remittances, support financial inclusion, and to avoid spatial and social fragmentation.

    Now more than ever, central banks must serve as a basis for sound innovation in the digital era to maintain the safety, integrity and stability of money and payments. All these developments make central bank public goods more critical, [6] and central banks need to be at the cutting edge of technology to serve society.

    It is for these reasons that the BIS established its Innovation Hub to spearhead central banks’ responses to digital innovation. Digital innovation knows no borders. It is therefore the Hub’s mission to foster international collaboration and build on the efforts of central banks that have made significant advances in digital innovation. Partnerships with other stakeholders, such as bank and market supervisors and international organisations are critical for this task.

    We are building a portfolio of projects in areas relevant to central bank activities across the three Innovation Hub Centres that have already been established – in Hong Kong SAR, Singapore and Switzerland, each in collaboration with the local central bank. These projects are designed to develop in-depth insights into critical trends in financial technology of relevance to central banks, and to develop new technological applications - typically as proofs of concept to be delivered to central banks – to enhance the functioning of the global financial system.

    The BIS decided in June to expand the Innovation Hub over the next two years to include four new centres in Europe and North America.[7]

    I welcome the opportunity to strengthen our links with Latvijas Banka through the new Eurosystem centre based in Frankfurt and Paris. The opening of the Stockholm centre, with a group of Nordic central banks, will be another opportunity to tap the technological potential of your region. Centres will also open in London and Toronto, alongside a Strategic Partnership with the Federal Reserve in New York. With an expanded footprint, the BIS Innovation Hub becomes a global force for innovation in central banking.

    Finding solutions to complex problems

    Finding solutions to complex problems over the coming years is an imperative for not only the successful functioning of central banks but also for strengthening financial sectors.

    This imperative resonates particularly strongly in Europe given the twin objectives of creating a Capital Markets Union and advancing the digital agenda. There is clearly a strategic complementarity between these two objectives, and an opportunity to improve both the resilience and efficiency of the European economy. The Next Generation EU instrument can further contribute to this digital push, as emphasised last week by President Von Der Leyen in her state of the union speech.

    Latvia’s journey towards digital innovation serves as an excellent model for how central banks are taking the lead in making advances in the provision of innovative financial technology solutions. [8] Today, every sixth payment made in the Electronic Clearing System of Latvijas Banka (EKS) is an instant payment, and information from the Credit Register is now available also via smart devices. Latvijas Banka’s own ZibLab, a virtual platform for promoting the creation and development of innovative and user-friendly payment solutions, helps market participants to jointly tackle practical and technological questions and coordinate development of interoperable, secure, user-friendly and innovative payment solutions in the Baltic region.

    The BIS Innovation Hub is also embracing new innovative ways to find solutions to solve many complex cross-border problems arising from unnecessary fragmentation or efforts being undertaken in silos.

    Digital payments and central bank digital currency (CBDC) are an important part of our agenda. As of mid-July 2020, at least 36 central banks had published research into retail or wholesale CBDC.[9] While no major jurisdiction has as of yet decided to issue a retail CBDC, several projects have reached a pilot phase.

    Going forward, enhancing coordination and taking steps to prevent or reduce fragmentation in cross-border payment systems are public sector priorities, as embodied in the request by the G20 Finance Ministers and Central Bank Governors to the Financial Stability Board, together with the BIS’s Committee on Payments and Market Infrastructures, other international organisations, and standard-setting bodies, to develop a roadmap to enhance cross-border payments.[10]

    Exploring the potential of “next generation” multilateral cross-border payment platforms will be a key focus for the BIS Innovation Hub Centres. One such project underway at our Singapore Centre examines how digital identity and payment rails could be interlinked to create a “global stack”.

    But the digital transition beyond payments – particularly the development and application of regulatory technology (regtech) and supervisory technology (suptech) - is also a key area of interest.

    Over recent years, there has been growing interest from financial institutions and the official sector in the use of technology to support new business models and to solve regulatory and compliance requirements more effectively and efficiently. The potential collective benefits for regulated entities and supervisory authorities to improve efficiency, reduce manual processes and make effective use of data, are enormous.

    To this end, the BIS Innovation Hub, through its centre in Singapore and together with the Saudi G20 Presidency, this year co-hosted the first global virtual TechSprint initiative. Fintech firms were invited to develop innovative technological – and deployable – solutions to address real-life challenges identified by supervisory authorities. This was undertaken using the API Exchange (APIX): the world’s first cross-border, open architecture API marketplace and sandbox platform in which participants can integrate and test solutions with each other via a cloud-based architecture.

    Other Innovation Hub projects contribute to the regtech and suptech agenda. Our Swiss Centre is developing a prototype of a central bank-specific, real-time capable market-monitoring tool. The cloud-based stream processing platform will process real-time financial data feeds and compute relevant liquidity and market risk measures. This will provide central banks with overviews of market conditions via customised dashboards and real-time alerts.[11]

    And we have many projects that go beyond regtech and suptech. In August, the Hub centre in Hong Kong SAR and the Hong Kong Monetary Authority launched the TechChallenge – Digitising Trade Finance initiative to highlight the potential for new technologies to enhance trade finance mechanisms (“tradetech”). Private firms were invited to submit innovative solutions focusing on connecting tradetech platforms, tech-driven trade finance inclusion for SMEs, and tradetech infrastructure for emerging markets.

    In the coming months and years, as the world deals with the fallout from the pandemic, and the shift towards digital finance evolves and accelerates, the Innovation Hub will work on finding real solutions based on practical projects to address ever more complex problems across an expanding range of areas, including cyber resilience, sustainable finance, and the application of artificial intelligence and machine learning to central banking and financial supervision. Collaboration with stakeholders such as Latvijas Banka, will be critical for this mission.

    Concluding remarks

    To conclude, actions taken by public authorities and central banks have been essential in helping reduce the intensity of the COVID-19 shock and its damage to the global economy and financial system, and ultimately restoring public security.

    Multilateral collaboration and proactive actions taken by central banks will also be essential for building a financial architecture that is future-proofed and resilient to withstand a large range of shocks. Technology and innovation will be front and centre as we move forward into this new world.

    I thank you for your attention and I wish you a very fruitful conference.

     

    [1]  C.Lagarde, Video interview with The Washington Post, conducted live by David Ignatius on 22 July 2020;

    https://www.ecb.europa.eu/press/inter/date/2020/html/ecb.in200723~0606f514ed.en.html.

    [2]  See BIS, Annual Economic Report 2020, June 2020, and the BIS Bulletins, www.bis.org/bisbulletins/index.htm.

    [3] See R Auer, G Cornelli, and J Frost, “Covid-19, cash, and the future of payments”, BIS Bulletin No 3, April 2020, https://www.bis.org/publ/bisbull03.pdf

    [4] See BIS, “Central banks and payments in the digital era”, in BIS Annual Economic Report, Chapter III, June 2020; https://www.bis.org/publ/arpdf/ar2020e3.pdf

    [5] See CPMI, “Enhancing cross-border payments: building blocks of a global roadmap - Technical background report”, July 2020; https://www.bis.org/cpmi/publ/d194.pdf

    [6] For a discussion of the role of central banks in the new world of payments, see BIS, Annual Economic Report 2020, Chapter III, June 2020.

    [7] See BIS, “BIS Innovation Hub to expand to new locations in Europe and North America”, 30 June 2020; https://www.bis.org/press/p200630a.htm

    [8] See Latvijas Banka Annual Report 2019; https://datnes.latvijasbanka.lv/ar/AR/LB_AR_2019.pdf

    [9] See R Auer, G Cornelli and J Frost (2020), “The rise of central bank digital currencies: drivers, approaches and technologies”, BIS Working Papers, no 880, August; https://www.bis.org/publ/work880.htm.

    [10] See Committee on Payments and Market Infrastructures (2020), “Enhancing cross-border payments: building blocks of a global roadmap - Technical background report”; https://www.bis.org/cpmi/publ/d194.pdf

    [11] The monitoring tool will initially focus on the foreign exchange (FX) spot market, although this may be extended to additional instruments such as FX futures and/or markets at a later stage.

Komentāri ( 2 )

  • Test

    21.09.2020 23:01

    How do you register?

  • Egita Streļčuka

    22.09.2020 09:23

    This year – conference will be held online on www.macroeconomics.lv, and every one, who is interested in the topic, can watch it.
    No registration in advance is required!

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