In recent years, in the developed countries, but also in a number of developing countries, the financial regulators have established and implemented various initiatives (innovation facilitators) aimed at promoting the use of financial innovation in different segments of the financial system. Given the importance of the issue and responding to the rising challenges, our central bank has recently established an Innovation Hub – a small expert group of the central bank, dedicated to closely monitoring and supporting fintech developments. The scope of work of the Hub is directly related to the mandate of modern central banks in the field of maintaining financial stability and monitoring systemic risks. This body will support National Bank’s efforts to deepen the financial inclusion, contribute to consumer protection and to providing operational and legal certainty in the financial markets infrastructure. We strongly believe that the Hub will be a central point of contact with the industry, including the fintech firms, and will enable building internal capacities for adequate implementation of the new technologies and monitoring of the associated risks, as well as serve as a platform for sharing information and discussing best practices. Finally, the Innovation Hub will also bring the prospect of using digitalization for supervisory purposes, as a complement to our current supervisory methods, principles, and judgement. Suptech is becoming synonym for exploring new technologies, especially in the area of supervisory data collection and analysis.
As Andrea Enria, the Chair of the ECB Supervisory Board, recently stated when addressing how digitalization might change banking, “supervisors are technology-neutral, but not risk-neutral”.1 As banks become more digital, the IT risks, including cybercrime risks, become increasingly relevant. In addition, as the financial system adapts to the new technological trends, concerns arise regarding issues such as data privacy, potential threats to the financial integrity, clarity, and consistency of the regulatory landscape and the potential for regulatory arbitrage, adequacy of the existing financial safety nets, including the central banks’ role as a lender-of-lastresort. Furthermore, the risk of procyclicality in light of the new lending platforms with little human interaction is also accentuated. Asymmetric information and lower transparency may result in underestimation of risks by new players, which in turn may put pressure on the profitability of 1/3  BIS central bankers' speeches  traditional players (banks) and increase their risk appetite, as well. And one of the lessons from the recent crisis is that increased access to finance yields short-term benefits, but it can also lead to financial instability overtime, especially if the level of financial literacy is lagging behind. When balancing between opportunities and risks, policymakers are faced with a rising challenge to be nimble, innovative, and cooperative in enabling financial innovation, without neglecting their main responsibility for preserving financial stability and dealing with systemic policy issues.