7/9  Steps towards a more integrated financial system at European level have already been taken since the crisis, with the Banking Union and the Capital Markets Union projects. These projects need to be further developed and implemented. The Banking Union, which was set up to put an end to the link between sovereign risk and banking risk, is now operational. What remains to be done in order to finalise it includes completing the resolution pillar by implementing a backstop and adopting a common framework to enhance the provision of liquidity and putting in place a European deposit insurance scheme. Finalising the Banking Union is of prime importance for the development of pan-European banks, and will make it possible to achieve a better balance of risks, economies of scale, a better allocation of savings towards productive investments and increased competitiveness of European banks at the international level. The other major initiative at the European level to strengthen financial integration is the Capital Markets Union project which aims to boost investment in the EU. Speeding up this Union will not only foster growth but will also enhance risk-sharing across European countries and mitigate the procyclicality of bank financing. We, at the Banque of France, support in particular three initiatives which should have a decisive impact on cross-border investment: First, the harmonisation of the insolvency procedures framework and its implementation by companies to promote investment in equity across Europe.
If incumbents depend on Bigtechs for key infrastructure such as cloud computing, if they rely on the same Bigtech to distribute their products through their platforms and then compete with Bigtechs on certain segments, they see their strategic independence challenged in the same way as hotels and retailers did. This process of commoditisation of incumbents may lower credit standards to compensate for higher pressure on margins and exacerbate their funding gap because of lower customer stickiness. Second, the question of cyber-risk. With greater interconnections between technologies and the financial system, the Banque de France observed in its Financial Stability Report of December 2017 that cyber-risk is moving from an idiosyncratic risk to a potential source of systemic risk which need to be addressed. This perspective is widely shared among public and private decision markers and it should not come as a surprise that cyber-security will be one of the priorities of the French presidency of the G7 next year. Third, the question of market structure and private monopolies, in particular as regards clearing services. In Europe, this topic has a specific dimension that results from the Brexit 6/9  outlook. The clearing of interest rate derivatives deserves in particular attention since the UK clearing houses have a virtual monopoly in the sector. Beyond handling transition issues in case of a “hard Brexit” we must ensure that critical key players do not become “too big to fail”. Of course, by its very nature clearing is an activity that generates major economies of scale, and thus encourages concentration.