This is because incumbent financial institutions will adapt, new players will join the financial ecosystem and those with strong business models will survive. And the most fundamentally transformative technology so far – DLT – still has important hurdles to clear. Innovations may solve some current problems, but they could also create new ones.
The regulatory framework needs to adapt so that the door is not opened to unmanaged financial and operational risks, unchecked critical dependencies within our financial system and moral hazard. Promoting financial stability is a core function of the Bank of Canada, and we take a system-wide perspective when we monitor risks.