 Welcome to the Sixth Annual Conference of the European Systemic Risk Board. I'm Connie Lotzer of ECB Communications and your moderator for the next few hours. We have a very interesting afternoon ahead of us. We have key policymakers, central bankers and academics who will discuss policy challenges in the current macro-financial environment and address the topic of technological innovation and systemic risk. We will start with a welcome address by ESRB Chair Christina Gard, followed by a panel discussion on policy changes, challenges in the current macro-economic environment, which will be chaired by Pablo Hernández-Decos, Governor of Banco de España and Chair of the ESRB Advisory Technical Committee. The second panel, which is on technological innovation and systemic risk, will be chaired by Cecilia Skingsley, Head of the Innovation Hub at the Bank of International Settlements. We will also have a keynote speaker, Darren Acemolou, Professor at the Massachusetts Institute of Technology, and we had planned to have Stefan Ingris, Governor of the Sferr Griegsbank and first Vice-Chair of the ESRB. Unfortunately, Governor Ingris has lost his voice, so we will not hear from him today. However, we will record his speech and it will be available on the ESRB website later. The Head of the ESRB Secretariat, Francesco Mazzafero, will then make a few closing remarks at the end of the conference. For the panels and speeches, we invite the audience to submit questions using Mentimeter. To do so, go to menti.com and insert the voting code 47228727. We will now begin with the welcome address of President Lagarde, the Chair of the ESRB. Her remarks were recorded a few days ago. Hello everyone. It is my pleasure to welcome you to the sixth annual conference of the European Systemic Risk Board. When historians look back on our times, they may well say we live through an era of poly and perma crisis. Oh, what is that? An array of powerful shocks, one after the other and together. The pandemic, Russia's unjustifiable invasion of Ukraine, the energy crisis, to mention a few, have hit the global economy in quick succession. This unstable environment poses sizeable risks to financial stability in Europe. And those risks are further heightened by a weakening economic outlook. At the same time, monetary policy is adjusting to ensure that high inflation does not become entrenched and that inflation returns to 2% over the medium term. This is our mandate. In September, the ESRB highlighted these financial stability risks by publishing a general warning. This was the first such general warning published by the ECB since its creation in 2010. Reflecting the exceptional times in which we live. A key message therein was the crucial importance of ensuring the continued resilience of our financial system. Resilience is key in helping the financial system to deliver on its ultimate goal of supporting the real economy. Resilience is much talked about. But let's try to dig into what it consists of. I see two facets of resilience that are equally important. First, the capacity to withstand an immediate shock. And second, the ability to adapt effectively to new conditions. So in my remarks today, I will explore these two aspects of resilience and how we can best ensure that they are met across the financial system. After all, history books are not yet written. Our actions today will indeed determine the next chapter. And I have no doubt that if all parties work together, we can master the challenges that are standing before us. So let's look at the ability to withstand shocks, the first characteristics of resilience. By identifying and addressing vulnerabilities ahead of time, we can increase the resilience of the financial system, allowing it to withstand rather than amplify shocks. This applies first and foremost to banks, which remain at the heart of the European Union's financial system. The banks provide around three-quarters of credit funding from financial institutions to non-financial corporates in the euro area. And thanks to sound regulation and supervision in the wake of the global financial crisis, banks have built stronger capital and liquidity buffers in recent years that they now benefit from. And that stands in sharp contrast to the 2007, 2008 and 2009 years when banks' weak balance sheets intensified the impact of the global fallout. This robust starting position explains why, when the pandemic hit us, banks were able to be part of the solution in tackling the crisis and not part of the problem. But given today's weakening economic outlook, we should not be complacent. It remains important that banks make adequate provisions and undertake prudent capital planning. They should be attentive to credit risk and remain alert to potential flaws in their internal models as the risk environment evolves. Banks also have a key role to play in contributing to resilience by having good visibility of near-term liquidity risks and concrete plans to tackle them. Strong cyber defenses and the ability to withstand fire sales and the associated mark-to-market hit on assets held on their balance sheets. If not managed properly, these are all types of risks that are particularly likely to amplify and propagate shocks throughout the financial system. But building resilience cannot stop at banks. Non-banks also play an increasing role in the financial system in Europe. The share of non-bank finance in overall credit from financial institutions to the real economy has increased from around 15% to roughly one quarter since 2009. If such alternative sources of finance are to work reliably, these institutions must also be resilient to shocks. The ESRB has identified several vulnerabilities among non-bank financial institutions and has asked legislators to address them. One such example concerns money market funds. Money market funds are intricately connected to the rest of the financial system, including banks. So when the pandemic hit in March 2020, the money market funds experienced acute liquidity strains. You all remember that. This reflected a structural liquidity mismatch at the heart of their operations, with them offering on-demand liquidity to investors while at the same time investing in more illiquid assets. Recent turmoil in the UK bond market again highlighted the importance of money market funds as cash management vehicles in the context of liquidity vulnerabilities. The ESRB issued a recommendation last December aimed at addressing structural vulnerabilities in money market funds. Swift legislative action on this front is critical to allow non-banks to help strengthen our financial systems capacity to withstand shocks. It's important and it's urgent. So let's now look at the second element of resilience, which is, you remember, the ability of the financial system not just to withstand the shock, but to adjust to the new conditions. This holds for both the system and those who oversee the system. As banks adapt to a range of technological, structural and environmental challenges, the regulatory framework needs to adapt as well. In March this year, the ESRB published a blueprint on how to make the EU macroprudential framework fit for the next decade. It is crucial that the European Commission's review of the macroprudential framework for the banking system be pushed ahead as soon as possible. And that is because we must contend with potentially new sources of financial stability risk. For example, one area in which the financial system is adapting to new technologies is in the so-called crypto assets and decentralized finance, DeFi. Crypto assets are exceptionally volatile and pose considerable risks to consumers. Recall, after peaking in November 21, that was just a year ago, the price of Bitcoin fell by almost 75% in one year. And only last month we saw the chaotic, complete collapse of FTX, a crypto asset exchange once valued at $32 billion. And a critical player in that field. While the impact of such episodes has been contained so far, systemic risk could easily arise from increasing interlinkages between the crypto ecosystem and the traditional financial system. Policymakers, including macroprudential authorities, must carefully consider if and how the crypto ecosystem needs to be regulated. Europe has been at the forefront here, with the agreement on the markets in crypto assets regulation, also known as MICA. Its swift implementation is key to closing regulatory gaps, with MICA providing a consistent framework for crypto asset issuance and service provision in the EU. Implementation is a few months, if not a couple of years away, unfortunately, but be it as it may. This can in any event only be a first step. From a financial stability perspective, financial regulation could and should be enhanced along several dimensions. For instance, sectoral financial regulation needs to address the risk from interlinkages through financial institutions' exposures to crypto assets. Monitoring needs to be complemented by clarity on the regulation of lending and staking activities. I had to look up what staking was, but I'm sure you all know. And finally, market developments in decentralized finance should be taken into consideration as well. I'm sure more to come in the weeks and months to come. So let me conclude here. Eraclitus is said to have observed that there is nothing permanent except change. And we can certainly relate to those words in an era increasingly defined by shocks to our economy. Change is at the root of why we need both a resilient financial system and adaptable supervisors. To ensure stability, the financial system needs to be able to weather rapid changes that produce shocks. And regulators and supervisors need to adapt to a never-changing economic landscape if they are to continue effectively to safeguard the financial system. After all, unexpected crises often come from unobserved risks that were allowed to grow over time and eventually materialize. That is why macro-prudential policy must remain alert to the emergence of new challenges as and when they appear. We therefore need to encourage resilience wherever it is lacking and adapt to change whenever it's necessary. And with this, I now open the sixth ESRB annual conference. Thank you.