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Opportunities and challenges for banking regulation and supervision in the digital age

Author(s): José Manuel González-Páramo

Date published: Apr 2018

The evolution of economy and society is featured by continuous change. Most of the time, this change is slow and incremental but, every now and then, rapid disruptive changes take place in short periods of time, leading to what are commonly known as “revolutions”. We are living now one of these stages of disruption. Massive adoption of digital technologies invented in the second half of the 20th century, namely the Internet and mobile phones, together with the exponential growth in computation and storage capacity at a lower cost, is radically transforming the world, profoundly changing personal relationships, business organisations and, in general, the way economic value is created.

This digital revolution has also arrived in the financial sector. The negative impact of the economic environment on banking, expectations of a prolonged period of low interest rates and the stagnation in lending lead inevitably to the quest for transformation processes that enable costs to be reduced and a boost in revenues. Things become more complicated if we take into account two additional factors: the reputational problems still weighing on banks and the assimilation of the aftermath of the regulatory tsunami. Accepting that all the above requires profound changes in the sector; the presence of this radical disruptive force, the digital revolution, has changed everything.

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SUERF Policy Note, Issue No 31SUERF Policy Note, Issue No 31

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