 Thank you very much actually. Thank you very much Benoit for offering me the opportunity to share this great panel. I'm very honored and especially touched Benoit is a very good old friend very faithful actually and I'm lucky enough to be one of the co-authors of Benoit and I can tell you that is it's really fun I Think so I'm not going to add to the list given by previous speakers Maybe Christine Lawrence and Charles have forgotten some of the features. I Think Benoit is also fun of cross-country skiing of rock climbing And overall he enjoys wild nature in general and he has the ability the rare ability to Admire the nature at any time and especially in the middle of a great crisis and I think this is maybe one of the clues this ability to admire the nature of the middle of a big storm I think on the top of his analytical skills. This is very important to understand his success So I'm especially delighted to share this second panel since on monetary policy technology and globalization because I think these three Elements monetary policy technology and globalization are the keywords of Benoit That will that will best define his footprint at ECB over his eight years term For central banker, of course, a monetary policy is the equivalent of basso continuo from Baroque musician But technology globalization rather pertain to the repertoire of Contemporaneous music with new scales new sounds new instruments and a batch of dissonances So Benoit is not the conductor of this music. So please do not blame him He's just someone trying very hard to tune the instruments and sometimes to deal with broken strings So this is really essential. So everybody that knows about symphonic orchestras knows that this is really key More furthermore Benoit's curiosity and culture make him able to hear each of The voices in this cacophony. So he's definitely open to new technologies and new ideas So Like a land I came back to the first pitch in February 2012 actually, this was a joint workshop of the ECB with Guess whom the Bank of International Settlements Already here in Frankfurt about global liquidity and risk appetite Reinterpretation of the recent crisis. So at that time Benoit was quite shy. There were only seven footnotes in this speech So over the eight-year term he delivered many speeches. It has been repeated My own count is an average of two per month And So it about internet what we are going to discuss in this panel international capital flows global liquidity international aspects of monetary policies Payment systems and more recently digital currencies So three months ago, he gave a very insane insightful speech in Luxembourg This was a joint conference of the Central Bank of Luxembourg with Toulouse School of Economics and the speech was on digital challenges to the International Monetary and Financial Systems System and so the keywords were all together the three keywords all together So a good introduction for for this panel actually and here they were 45 footnotes. So this is more in line with his standard So you you probably know that Benoit is extremely popular in academia because he's the one that makes sense of the research produced and Also because he's very helpful actually when a student walks into my office asking for ideas or references I can always rely on a speech by Benoit and For for the analytical content and also for the footnotes So not to mention of course, he's excellent books So now I'm going to turn to this distinguished panel. We have three top researchers and top policy advisors I have asked them to tell us what in their views are the main recent transformations in the area of Technology globalization that are bringing major challenges for monetary policies We'll start with Christine Who is going to discuss a new landscape of international capital flows and its implications for the resilience of the system and For monetary policies. So you so I'm not going to present each of the panelists Of course, you know them just to mention something about each of them So I just saw that she was She she was named on honorary commander in the order of the British Empire By her Majesty Queen Elizabeth II for services to the British economic policy So more specifically, she's a former external member of the monetary policy committee of the Bank of England I'm very much impressed by this award So thanks Christine for being with us today. You have ten minutes nevertheless Thank you very much It's it's really an honor to be here to celebrate Benoit's contributions to the ECB in the policy world more broadly So it's background for today. I did what it sounds like many of us did which was Google Benoit speeches I was going to just say there's way too many to read I didn't have the staff that I'm Mark Carney or Mario Draghi has to actually count them. It's just a lot But what I did so then what I decided to do was narrow it down and focus on just the speeches You've given that had these three keywords in the title that was still too many speeches to print out and read I even felt badly printing them out. You know under the pretense. I might read them We all do that saying that sort of counts just to print them out Even if you don't have time to look at them, but given the ECB's newfound attention to the environment I felt badly doing that So instead what I did is I'm going to focus my comments on your speeches that include those three words that you've given in the last Three years which is still a very long number of speeches, which is a testament To what so many of us have appreciated about you You are prolific in choosing important topics going beyond just the economic conjecture of the day But really digging into important issues pushing our thinking summarizing the literature summarizing the complicated academic literature in an easy to access way and then pushing us pushing us to think about what we don't know What we can learn what we need to learn and think about more And what is particularly impressed me reading through some of these speeches that I'll highlight today Is how you are willing to question the conventional wisdom a number of times and even question your own wisdom that you said earlier In speeches you wrote a year before earlier There's a number of times reading your speeches you see your thinking evolve as more data comes to light more evidence That's a hard thing for people to do. It's very hard for academics to do But particularly hard for policy makers where everything you say is scrutinized and recorded So for you to reassess and update your thinking over time as more research came out as more data came out It's quite impressive so I'm going to try to do a bit of the same and I'm going to focus on three topics which you talked about in your speeches over the last few years Capital flow volumes capital flow volatility and the relationship between capital flows monetary policy and exchange rates And since I do not have as much time as you usually take in your speeches I'm just going to focus on one angle of that which is how all of these What changes have occurred in these three areas and what that means for the resilience of the global financial system So let me get right in there capital flow volumes. So here's a couple speeches articles you've written on this You were very early Made even saying early adopter an important shift that happened in thinking about capital flows a Shift which several people in this room contributed to and that was focusing not just on net capital flows Yes, Phillip Lane Helen Ray is to name a couple But focusing not just on net capital flows or current account balances But gross flows as you highlighted early on if you are worried about vulnerabilities even countries with fairly balanced net capital flows or global about current account balances Could still be highly vulnerable to liquidity shocks if they have large gross capital flows inflows and outflows So this is a graph which is very similar to the one Helen just showed us gross capital inflows This is for a sample of about 50 emerging markets and developing countries It shows the well-known contraction in gross capital flows since the during the crisis How capital flows have come back to some extent that are much more muted over the last decade or so and if you look at the breakdown of why this has occurred Capital flows are more muted primarily because of a sharp contraction in global banking flows So why is this happened? What has changed since the crisis? There's been quite a bit of academic research Which has showed found some evidence for a variety of reasons why global banking flows have contracted Some reasons are related to the crisis after effects of the crisis Some are related to policy changes adopted in response to the crisis But one factor that comes through again and again And there's very sound research now showing is that a major reason for the contraction in global capital flows is regulatory changes title prudential regulations title macro prudential regulations on banks have meant that banks have holding everything else constant contracted domestic lending and contracted international lending particularly cross-border lending by banks So I mean that's fairly you know fairly straightforward It shows regulations are working in one sense one of their one of their intended goals This is probably good for the resilience of the global financial system banks at the core of the system are safer sounder better capitalized But where I think the more interesting work is and where Benoit recently did a very nice article Was on the spillovers in the unintended consequences of this what he called the known unknowns of financial regulations And let me just give you one example one which I believe hey You and we'll probably talk about more in a few minutes In an example which comes from some research I've done with people at the Bank of Canada and Bank of England one of these unintended consequences is as tighter regular is on Related to macro prudential FX regulations. So this is one of these regulations Which has become increasingly used around the world basically a set of different measures Which can be taken to reduce banks exposure to FX reduced banks exposure to currency movements These measures have been used more widely They have meaningfully reduced banks cross-border borrowing and lending in foreign currency particularly in dollars That's been an important factor contributing to this contraction in bank cross-border lending and borrowing But one of the unintended consequences is that as companies have found it harder to access cheap FX loans from banks Companies are starting to increase more FX debt directly to markets So on one hand, this is this is a good thing banks are less exposed to FX risk We show in our work that banks stock movements are now less correlated with exchange rate movements So again banks at the core of the financial system sounder safer less exposed to foreign currency risks But some of that risks have now shifted to the shadow financial system more FX risk is held by mutual funds hedge funds pension funds insurance companies and other players Some of them may be able to handle that risk some may be less will able to handle that risk than banks and Whether they can handle that risk or not or understand what risk they've taken on they are outside the regulatory perimeter So regulators will have less of an idea of where those risks are accumulating and building up So that's just one example of these unintended consequences Which Benoit has talked about in which are very important as we think about the resilience of the system going forward So second area where Benoit has made important contributions is on the volatility of capital flows. I mean he has this great phrase he's talked about where he Assesses financial globalization based on the three E's if a globalization is efficient enduring and equitable And in particularly he's focused quite a bit on whether capital flows have become more enduring i.e. less volatile so one might think building on the comments that I just made as global bank flows have contracted and Combined that with the fact that global bank flows can tend to be the more volatile type of capital flow This would mean that global capital flows One would think would be less volatile possibly more enduring as Benoit hoped for Maybe his replacement would no longer need to worry about capital flows fueling bubbles and painful reversals So to assess if this change has happened in the global financial system since the crisis I'm not going to show you some results from some work I've done with Frank Warnock where what we do is we measure what we call capital flow waves or extreme capital flow movements We look at when there's sudden increases or decreases in capital flows coming into or out of different countries And then what we do is we graph the incident of countries about 50 advanced economies and emerging markets That have seen a sudden surge of capital coming in from foreigners on the left or the share of countries that have seen a sudden Stop of capital flows coming in from abroad on the right and what you see is since the crisis It looks like these capital flow waves these extreme periods of capital flow movements have become more muted since the crisis Now that could be good news and this could be relate to the fact that Banking flows again have been reduced around the world Those tended to be more volatile and that means that we may see more volatility in global capital flows going forward but Much of this contraction in global banking flows has occurred in advanced economies So a secondary question is do you see the same pattern for emerging markets emerging markets? Are the countries were that are most vocal about concerns about sharp changes in capital flows? And also the country is less able to hand some of the handle some of these sharp movements So now I'm going to show you the same graphs for just emerging markets So what you see is the incidents of these sharp capital flow episodes in emerging markets Are somewhat more muted at least in terms of periods of large capital inflows coming from abroad on the left But it's not so clear that these sharp episodes have faded especially in terms of sudden stops So this is more mixed evidence on the resilience of the global financial system since the crisis At least for advanced economies these capital flow waves seem to be more muted Reduction in banking flows seems to be making capital flows more enduring, but the benefits for emerging markets have been more moderate Now another related factor which Ben was talked about quite a bit in which Helen also covered is what's driving some of these changes How does this relate to risk and change is in the global financial cycle? So there's a lot of research Helen summarized some of it in the work She's been doing in this area on how these movements in capital flows at the global financial cycle Tends to be correlated with changes in a variety of risk measures also correlated with changes in monetary policy Global liquidity bank leverage something which Hayoon has worked on extensively Now what happens is global banking flows have contracted Has this been mitigated this relationship now? This is I think an important area for future work We don't quite know but there's starting to be some evidence that at least the correlations Between risk measures and capital flow movements seems to have been dampened. It's still there But quite a bit weaker. So if this continues again, I think it's too early in the cycle To know for sure, but this could suggest more resilience in the global financial system again back to tighter regulations Reducing global bank flows and thereby reducing the sensitive Sensitivity of some of these capital flows to ups and downs in the global financial cycle and risk So it could mean the cycle is more dampened, but again too soon to say for sure I Fred we won't have time for the third. Okay, okay that I was going to talk about The interesting area that Benoit has worked on on how monetary policy affects capital flows in the exchange rate and where he pushed Our thinking in terms of if asset purchases and unconventional policies have different effects on capital flows in the exchange rates I will skip that in the interest of the time and just conclude with one area Where I think we'd be remiss to not mention Benoit's contributions And we haven't heard much about it yet and that is that even though I focused on his contributions to economics and most of us Have given the nature of this conference the other area where I think he has made important contributions Is not being afraid to bring in some political concerns for example? One of his later works or earlier works talked about the currency war criticism of monetary policy And he was ahead of his time in bringing some of these issues to the forefront. I'm sure many of you remember Jack's Cintra This summer when Mario Draghi it talked about the need potentially for more expansionary monetary policy Which unleashed a torrent of tweets? from the US president and then soon afterwards a Jackson Hole as Jay Powell was getting ready to go up It was somewhat disconcerting that the main top of the conversation didn't seem to be whether he would suggest The Fed would lower 25 or 50 basis points But the main conversations seem to be how long it would take before President Trump tweeted in response to follow his comments And we were not to be disappointed the tweets came soon afterwards So it's fun to poke fun at this But these experiences do highlight the importance of Benoit's approach to policy making Even when he tackled these types of very sensitive topics He always relied heavily on evidence and research to justify his arguments This is a model for a central banker a model Which is becoming more important as central bankers are subject to increasing political pressure Including to soften some of these reforms I just talked about that have strengthened the resilience of the global financial system Whether political pressure affects the decisions of central bankers or not It does put more onus on all of us to justify their decisions with evidence So not to be perceived as making decisions based on politics instead of economics in there Benoit provide an excellent model. We should all aspire to Thank you. Thank you very much Christina I'm sorry for putting pressure on you, but we have to speed up the panel But I think we will come back to your issues because you know it's just going to continue with the Impact of the dollar on these flows inflows and outflows. So it's perfect timing So please you know where you are going. So as I said, I'm going not going to present him He has a very brilliant career, but the important point today is to know is that he's going to be the next Lucky colleague of Benoit Well, it's a great privilege to be here. It's this event is in some respects a retrospective, but for the BIS We're very much looking forward to welcoming Bonn while the Basel now to the extent of the BIS is Serving the whole central banking community, you will not lose him and in fact as we as we open this new chapter in the financial developments that are really Putting the central bank and central banks at the heart of these far-reaching developments that are changing the nature of money The financial system itself. I think this is the perfect stage for Bonn while to open a new chapter So please watch this space and Lail will will very much Expand on these themes. What I thought I'd do is just to follow up on Kristen's presentation and and discuss some latest developments now What I'd like to do is to begin with the emerging markets But I'd like to move straight on to the advanced economies shortly this chart in in the black line the black line shows the annual Appreciation of the broad dollar index so when that black line is above zero It represents an appreciation of the broad dollar index over the previous year The red line the thick red line is the percentage growth in dollar denominated credit to emerging markets so annual growth the dotted line is bank flows and the broad and the bold line is Total dollar credit and what you see is there's very striking pattern of Reflected symmetry where when the dollar has weakened in the previous year This coincides with a period of very rapid growth in dollar denominated credit to the emerging markets and what's in and what's interesting is just to Think about the last three or four years through the lens of this chart from the beginning of Well, actually it was in the middle of 2014 the dollar began began to appreciate very sharply You see the black line going up that coincided with a pullback in Dollar credit to emerging markets culminating in the devaluation of RMB in the summer of 2015 Whereas to in 2017 it was actually a very good year if you recall 2017 that was a year when even though the Fed was raising rates financial conditions were actually very Accommodative and the real economy was also doing very well Alas in 2018 the dollar began to Strengthen again, and we've seen the latest downturn now. Why might this be the case? Let me come back to this at the end, but let me just quickly skip to this chart So one hypothesis as Ellen in the previous session and as Kristen Mentioned in this session is that this has to do this has something to do with financial intermediation So if financial intermediaries are more forthcoming during a period when the dollar is weak You would imagine that balance sheet capacity is more ample Conversely when the dollar is stronger balance sheet capacity shrinks and the blue line here gives you the CIP Deviation it is the deviation So it's a difference between The interest rates that are inherent in dollar funding in the money markets Versus the interest rate on the dollar that's implicit in the FX swap market The sign convention is such that when that blue line is negative It means that dollars are very scarce in the FX swap market And what we've seen is that even though textbooks say CIP deviations are impossible You can see that they've been the rule rather than the exception after the crisis And again, you see this very striking reflect symmetry where a stronger dollar, which is the red again The broad dollar index is associated with tighter financial conditions now if you run a regression where you say where you Regress the change in the CIP deviation on The broad dollar index you actually get a sensitivity of how much the CIP deviation of a particular currency vis-a-vis the dollar is as a Function of the broad dollar index and you can actually plot it on this kind of chart where We are measuring the the dollar beta. It's the regression coefficient where you're asking how sensitive Is the CIP deviation of the euro? Let's say it was a dollar With respect to changes in the broad dollar index and that's a dollar beta for the euro And then you say well, what is the average size of that CIP deviation of the euro? And what you see is that there is a striking Positive relationship where it's the currencies whose CIP deviation is most sensitive to changes in the dollar That tend to have the largest deviation in other words This is our cross-sectional relationship. That's rather like the capital asset pricing model the dollar your sensitivity to the dollar is A pricing factor in the asset pricing sense and notice the really striking thing The left-hand panel is a three month the right-hand panel is a five-year basis Notice the really striking thing here, which is that it is the safe currencies that tend to have the largest deviation So it's not the Australian dollar or the New Zealand dollar it's the yen the Danish Kroner the euro and the Swiss Frank and one hypothesis here is that the Institutional investors from the euro area from Japan they have to invest globally But they have obligations to their policy holders and beneficiaries in the home currency And they have to avail themselves of the swap market And so they are in the dollar the nominated securities market But they would rather not be and because of this This is going having to go through the banking sector and is showing up in its sensitivity to the dollar itself So what are some of the implications? Well, the broad dollar index and as Christian said various risk measures such as the VIX index of implied volatility in the stock market Have lost some of the explanatory power as compared to the pre-crisis years and we have to ask ourselves Well, what are the now the more relevant risk indices and and to some extent the broad dollar index may actually have a role to play there another indicator is that another implication is the the the implications for monetary policy itself now whereas Institutional investors from Japan the euro area Tend to go for long-term securities long-term bonds the hedging takes place normally at much shorter Maturities so they're rolling over maturities that are much shorter frequent at much higher frequency and At a first at a first approximation The hedging cost is the short-term interest rate and so when you take that hedge return the slope of the yield curve itself comes in in these hedging decisions and the market dynamics and in that sense monetary policy and The relative and the relative slopes of the yield curves across the major jurisdictions are going to be very closely related as well And it would not be an accident for example that when the Fed was raising rates In in the years running up to the most recent period and as the yield curve was flattening We saw a much greater demand for euro area securities because even the long-term rates were low The short-term rate was even lower and therefore the slope was higher We saw a lot of capital inflows into into euro denominator securities and I think What all this means is that this very sharp distinction between real and Financial developments may be harder to draw Even than perhaps you had once thought So and yes, let me complete that this is perfect June. Thank you very much so we've seen the the flows the relative the flows the impact of the dollar on the flows and on the prices actually and Something is missing in the picture and it's going to be Broke by late now If this is the digitalization and we have some suddenly a new dimension of the discussion that is erupting And how can we analyze this? so let I would say also deliver speeches and She's actually very good in that. I read a number of speeches with a lot of interest I recommend especially the last October speech on Well digital currencies stable coins central bank digital currencies especially fast payment systems Which actually is the focus at the end of the speech Really very insightful. So thanks for for being here and The point yes, so I've been working with Benoit now for over I guess for a decade Starting at our respective treasuries where we both were drafted as financial firefighters And then I followed him into the world of central banking where we were both working on stabilization recovery and normalization in our own jurisdictions and Over that time I've developed very deep admiration for Benoit's keen insights and outstanding judgment But just as important Benoit always has a plan and it's generally a good plan and it's generally addressed to the right problem And he generally gets it executed with exceptional Efficacy and strong support and that in my opinion is a rare and invaluable combination in public service Then was success I think can be seen actually in the data Nope Nope hold on There we go So his tenure at the ECB was marked by an incredible turnaround in both unemployment and output growth in fact at the Fed we now term that the Corée curve or La Courbe Corée, which is one of the few things that works in both languages Benoit's research interests are very forward-looking as others have noted and extend well beyond the macro economy When he was appointed chair of the CPMI the global standard setter for payments issues He doubled its output Resulting in nearly 75 reports so you can add that to the 175 speeches And he turned its focus to digital currencies well before many other central bankers realized these issues would be Transforming our worlds indeed the number of Google searches for central bank digital currencies increased sharply over the course of his tenure and At the start of his term bitcoins market Capitalization was small and there were only a handful of crypto currencies But in the eight years since then you can see that both the market cap and the number of crypto currencies is now in the thousands Indeed the potential of crypto currencies and stable coins to scale rapidly is Illustrated by the accelerating rates of technology adoption and the growth of large networks And that I think is the topic that I was asked to speak about and we can understand I think through looking at some of these trends why Benoit was asked by G7 leaders to look at the issue of Emerging stable coins if you look at the adoption rates of new technologies Essentially they compress over time so what once might have taken 40 to 50 years Landlines to reach 80% of the population later took 15 years in the case of the internet This is looking at the US and most recently smartphones and social media have achieved the same level of adoption in less than a decade But that rapid adoption is even more evident in the payments landscape Where network externalities are extremely important between in over the course of five years Venmo transactions grew over 66 times in China mobile payments Grew over 35 times in only five years and in India own over only three years We've seen that kind of payment adoption going to 400 times the pace In terms of digital currency payments Projects from big technology firms that start with network advantages They have the potential to scale even more rapidly and because the utility of any medium of exchange Increases with the size of the network that uses it the power of a stable coin payment system depends on the breadth of its adoption with nearly one-third of the global population as Active users the Libra stable coin project stands out for the speed with which its network could reach global stagale and That potential is leading central bankers and other authorities to revisit fundamental questions about money and payments While central bank money and commercial bank money are the foundations of the modern financial system Non-bank private money or assets also facilitate transactions among a network of users in some cases those non-bank private assets may have value only within the network While in other cases the issuer may promise Convertibility to a sovereign currency such that it becomes the liability of the issuing entity in Contrast stable coins aspire to achieve the functions of traditional money without relying on confidence in an issuer such as a Central bank to stand behind the money and for some potential stable coins It appears users may have no rights with respect to the underlying assets or to any issuer So while we've seen the growth of massive payments networks on existing digital platforms such as Ali pay and WeChat pay So far these networks operate within a jurisdiction based on the sovereign currency as the unit of account and Balances are transferred in and out of bank or credit card accounts We've also seen the issuance of stable coins on a much smaller scale such as Gemini or Paxos What would set the Libra project apart if it proceeded is the combination of an active user network of more than a third of the global Population with the issuance of a private digital currency Opacally tied to a basket of sovereign currencies That potential to be adopted globally in a short period and to establish itself as a potentially new unit of account means the stakes are Exceptionally high Libra and indeed any stable coin project with global scale and scope must address a core set of legal and regulatory challenges unlike social media platforms or ride-sharing applications Payment systems cannot be designed as they go due to the nexus with consumers financial security So to just give you an illustration of what kinds of risks regulators are worried about Cryptocurrencies already pose risks to the financial system Estimated losses from fraud and thefts associated with cryptocurrencies nearly tripled over the last year alone and in most cases Customers bear the losses by contrast consumers in the US in the Euro area Expect strong safeguards on their bank accounts and the associated transactions Statutory and regulatory protections mean that consumers can reasonably expect their deposits to be insured up to a limit fraudulent transactions to be the liability of the bank Transfers to be available within specified periods and clear standardized Disclosures of fees and payments not only isn't it clear that comparable protections will be in place with Libra or what recourse? Consumers will have it's not even clear how much price risk Consumers will face since they don't appear to have rights to the stable coins underlying assets illicit finance is also a significant concern In one industry report research found that roughly two-thirds of the 120 most popular cryptocurrency exchanges have weak AML CTF and KYC practices Only about a third of the most popular exchanges require ID verification and proof of address and that's notable since one study Estimated that more than a quarter of Bitcoin users and roughly half of Bitcoin transactions are associated with illicit activity So there are also questions related to financial stability Liquidity credit market or operational risks alone or in combination could trigger a loss of confidence and run like behavior Of course the precise nature of that risk would be driven in part by how the stable coin is tied to an asset if at all And the features of the asset for instance a stable coin tied to one to one to an individual sovereign currency would be quite Different than one tied to a basket of currencies a stable coin built on a permission network quite different from a permissionless network and a stable coin used Solely by commercial banks quite different from one used for general purpose use by consumers Similarly, there are important implications for monetary authorities particularly for smaller economies There may be material effects on monetary policy from private sector digital currencies as well as from foreign central bank digital currencies And many respects these are similar to dollarization Aside from the fast-paced and wide scope of adoption So for all these reasons the emergence of stable coins is raising important questions for regulators everywhere In in the United States the regulatory framework is not straightforward Our current framework is based largely on whether a cryptocurrency is deemed to be a security or has associated derivative financial Products or the participating institutions are themselves supervised unlike many other jurisdictions in the Euro area Regulators don't have authority over retail payments in the US more over the regulatory challenges are likely to be inherently cross-border in nature, which is why the G7 took this up Because stable coins are unlikely to be bound by physical borders Regulatory actions in one jurisdiction are unlikely to be fully effective without coordinated action elsewhere Of course the prospect of global stable coin payment systems has intensified the interest in central bank digital currencies Proponents argue that central bank digital currencies would be a safer alternative To privately issued stable coins because they would be a direct liability of the central bank But a more relevant question Maybe whether some solutions may be able to offer the safety and benefits of real-time digital payments based on Sovereign currencies without necessitating radical transformation of the financial system in the US There are important advantages associated with current arrangements physical cash and cash in circulation Continues to rise due to robust demand for the dollar and of course as others have noted the dollar plays an important role globally Moreover, we have a robust and diverse banking system that provides important services along with a widely available and expanding variety of digital payment options Circumstances where the central bank issue is digital currency directly to consumer accounts for general purpose use raises profound legal policy and Operational issues that said it's important to study whether we can do more to provide safer less Expensive faster or otherwise more efficient payments based on sovereign currency Some jurisdictions are likely to move in this direction Faster than others based on the particular attributes of their payments and currency systems And so we are actively seeking to collaborate with other jurisdictions as we advance our understanding of the potential benefits and costs In the US we're actively working to introduce a fast payment system for the United States Benoit has been very involved in the one here to improve the speed and lower the cost of consumer payments And finally as we work to reduce frictions one of the most important use cases is for cross-border payments Which everyone agrees are slow cumbersome and opaque authorities in many jurisdictions? Recognize the importance of cooperating across borders with each other and the private sector to address these cross-border frictions So given the stakes any global payments network will be expected to meet a high threshold of legal and regulatory safeguards before launching More broadly the work ahead is not easy the policy issues that I've outlined are complex the coordination Challenges are significant and there are few simple fixes That is why I'm especially pleased that Benoit will continue to help us navigate these issues as the new head of the BIS digital innovation hub. Thank you Thank you very much. Well, I think a lot of food for thought I already have some questions, but I need some guidance about because officially we have three minutes for the discussion Okay, so who would like to start yes Thank you very much for the very comprehensive presentations. Can I ask one question to Christine Forbes? perhaps one missing Explanation on why banking flows stopped If I can understand from your diagram this happened around 2010 2012 so that perhaps was the fear of the bringing of the euro So perhaps this is the most Useful explanation of why this happened What do you think? Thank you for the very concise question and of course the answer is very simple, but please keep it Can we take a couple of others yes Here yeah took a question one for Christine and one for you for Christine Facebook paid zero taxes in Europe since it was ever created and Typically the possibility of printing money is called senior age or tax senior age Why should the company whenever pay taxes in Europe should be given something that only governments have for free The second question you Mentioned a lot about flows The one of the key reasoning markets we see is that given hundred the currency of the wealth Where people are denominated so the passport a Third is American and two-thirds is the rest of the world and the rest of the world does not trust their own currency Because they don't trust the government and so what happens half keep Dollars the minute that keep assets in dollar denomination So there might be in any currency they don't trust their own government So they basically swap into dollars Is this the reason why they beat it so much higher because fundamentally the rest of the world they're not trust their own government And that's why they resolve to the dollar and hopefully they will trust the euro that will be rebalanced Thank you Okay, so I wanted to ask a question Coming back after listening to Lail coming back to the two of you So we've seen the regulatory challenges with digital digital currencies There are different types of digital currencies, of course But what what are the main challenges for capital flows and capital markets? We can think about the market for safe assets, but also the markets in emerging economies So could you give your insights about about this? Okay, so You would like to start or yes, I can I can start so so David asked a very good question Which is why so much in in dollar assets? I think here it's it's partly historical But I think it's very important to recognize how all the pieces fit together and reinforce each other So on the one hand dollar is an invoicing currency, but that means that working capital has to be in dollars But then if you're investing In an oil plant then of course oil is priced in dollars Therefore you have to you have to borrow in dollars But that means that there's a lot of dollar debt out there, which means that it ends up on the portfolio of of global investors, so it's not the US Borrow is a such it's the dollar denominated security. So it's very self. I mean it is a reinforcing set of factors and Provided everyone else is doing it. Of course that you would want to do do that to to reinforce Let me just you know add how happy we are to have been while at the BIS because I think it's it's it's easy to underestimate how much interest there is out there and For central banks, let me just reiterate something that I said at the very outset Which is central banks really find themselves at the center of some of the most far-reaching developments in the financial system It's a nature of money the nature of the payment system as Lail was laying out and I think there is so this is an opportunity for us to really rethink some of the most fundamental questions and You will see but are very often in Basel when you when you come to Basel and I think it's going to be I think it's going to be well, it's it's certainly a real privilege for us to You know continue our work in this area. I think it's I think the short answer to your question and yes about what are the implications of Digitalization for these traditional international finance questions is we have yet to see but I think that they are probably The answers probably will surprise us when we when we finally get there Okay So I'll take three questions So first the contraction in international bank flows it just mechanically a lot of that is Europe because Europe was where a lot of The boom happened before in cross-border bank flows and where some of the collapse happened But it wasn't just because of say slower growth in Europe or pressure on individual banks in Europe There's also quite a bit of research that shows that it was title regulations in a number of countries which contributed and also some of the Crisis resolution packages. So for example, there's one study which shows for the UK The UK pass what was called a funding for lending scheme, which basically gave increased incentive to lend domestically instead of internationally And that led to a meaningful contraction in UK cross-border bank lending which actually contributed meaningfully to the global Contraction and cross-border bank lending just because the UK is such a big share of cross-border bank lending So it wasn't just slower growth in Europe There's a lot of other things going on at the time too other mechanically Europe is a key part of the story for sure The question on international taxation So I think some of that is especially related to the tech companies is more forlil than for me But I will just make a comment that Philip Philip Lane is in his pre Policy life wearing his academic hat did some very nice work showing how these differences in tax rates do matter quite a bit for Explaining capital flows. He showed how for example in Ireland some of the tech companies Preferences to locate there for tax reasons can explain a big chunk of what we're seeing. So it's yes. It is very important Your question Agnes on the big challenges for capital flows due to technology and digitalization I hope so fascinating issues, but let me just link it back to the one that I spoke about which was the post crisis a number of The reforms we've taken have made a sounder safer banks at the core of the financial system. That's good There's some evidence I showed that suggests this had made has made the global financial system more resilient Maybe somewhat less vulnerable to changes in the global financial cycle risk measures They made capital flows more enduring as Benoit kept focusing on so that's good news But new technology and some of these new forms of capital flows Especially if he can happen by pressing a button on a phone does make me worry that then these risks are shifting more to this Sector so banks are sounder, but now the capital flows are shifting elsewhere So some of the progress we've made there we should not rest on our laurels. There is it's gonna be a whole new area We're gonna have to shift our attention to No So I'm going I think we are going to close this wonderful session What can I take home? I think it's quite clear for the next eight years We need to work very hard on looking at capital flows separately for each type of capital flows Not only gross flows, but also the different types of and also linking this discussion with the payment systems because as you say the distinction is going to be difficulty Going forward The asymmetry is in the system. We the word is not flat. We know that it's not flat from a geographic point of view but also with respect to prices, so this is very important message and Also, it's fascinating how we need today to rethink about what is a currency? What is an international currency? What is the international monetary system? So this is fascinating because we are sometimes reading old stuff to To make sure we really understand what these new things are bringing so it's really stimulating for for the research community, so thanks a lot for organizing This wonderful seminar