Several key initiatives contribute to this Financing Union and already exist: (i) the Capital Markets Union, which promotes the diversification of private financing; (ii) the Juncker Investment Plan, which mixes public and private investment towards the real economy; and (iii) the Banking Union, which addresses persistent financial fragmentation. These initiatives, however, lack the unified governance of a Financing Union, which would help circumvent bureaucratic barriers and foster synergies. In addition, progress towards a Financing Union is still needed in four key areas: First, providing incentives for cross-border investments – mainly in equity – through accounting, taxes and insolvency laws. Strengthening the free movement of capital within the EU requires overcoming a wide range of legal obstacles. We should improve the 2/5  BIS central bankers' speeches  predictability of insolvency frameworks, eliminate tax-related biases that penalise equity and harmonise the accounting rules for small businesses; Second, developing pan-European savings products more oriented towards long-term investment. This could be done through a variety of savings vehicles: the creation of European venture capital funds, new market initiatives for green bonds, securitised portfolios that are diversified across member states, and so on and so forth; Third, completing the Banking Union; Fourth, controlling financial activities and risks that are of vital importance for the euro area, such as supersystemic CCPs. Improvements in these four areas are needed so as to reach significant gains for digitalisation, SME’s scaling-up or energy transition. In each of these fields we have significant investment needs.
In a recent survey of the banks and insurers we regulate, conducted as part of our ongoing monitoring of the impact of COVID-19 by the Bank’s Fintech Hub along with colleagues from the PRA, around 45% of those firms that participated reported that the crisis has led to an increase in the importance of AI and data science applications for their future operations, with around 55% reporting no change, and none noting a decrease. The survey also looked at changes in firms’ investment plans and resource commitments for AI projects as well as areas where the crisis has had an impact on existing applications across different business lines. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  While the use of AI has clear benefits in an increasingly data-driven economy, there are risks and challenges. And the impact of those benefits and risks will be felt at different paces and different depths at technological, social, corporate, and systemic levels. It’s useful to think of the risks and challenges in a hierarchical way, starting with those that may become apparent at the data level and building up to the level of models trained on those data; then, widening to the level of the firm, and finally, up to the level of the financial system as a whole. Overlaying this are the regulatory and legal challenges presented by AI.