Denis Beau: What role should banks play in the twin digital and climate revolution? Speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the conference at the Jean Monnet University, Saint-Etienne, 15 April 2022. * * * Accompanying slides can be found on the Bank of France website. [SLIDE 1] Students, faculty, ladies and gentlemen, We now have sufficient distance to say that, if the health crisis unleashed by Covid-19 was not compounded by a financial crisis, this was in part because our prudential framework has made banks considerably more resilient. The new framework, coupled with the exceptional support measures introduced by governments and the European Central Bank (ECB), enabled banks to continue financing businesses during the health crisis. Today, it is enabling them to cope with the economic and financial impacts linked to the war in Ukraine. That being said, for this new architecture to be consolidated, the Basel III Accord still needs to be fully implemented in a manner that is fair, reasonable and definitive. Yet this strengthened abilities to withstand shocks cyclical crises must not blind us to more structural vulnerabilities, which the health crisis has helped to amplify, I am thinking in particular of digitalisation and the transition to a sustainable economy.
French banks have a head start in this regard, owing to the statutory disclosure requirements applicable to institutional investors since 2015 and the ongoing dialogue in recent years with the ACPR, notably aimed at measuring action on climate 2/6  BIS central bankers' speeches  commitments. 1.3 These vulnerabilities are a source of risk for financial stability [SLIDE 4]  The vulnerabilities that I have just outlined could affect financial stability. If the public and private responses to these structural developments fall short, banks could be weakened, which in turn could adversely impact the real economy. In terms of the digital transition, competition from new intermediaries, such as fintechs, bigtechs and DeFi players, along with the rise of private digital assets like stablecoins and cryptoassets could (i) lead to fragmentation of financial and payment services, making them less safe and efficient, and (ii) cause banks to be crowded out of the value chain by the “platformisation” of financial services. DeFi especially is seeing pronounced growth, although the amounts in play remain small in absolute terms, as the chart illustrates [SLIDE 4]. Moreover, these new participants and products are not currently subject to regulations and supervision comparable to those applicable to banks. This situation could eventually impact financial stability, notably if it is accompanied by decreased regulation of critical financial and payment services providers and a reduction in the security associated with regulation.