AMSE | Aix-Marseille School of Economics Marseille, 11 December 2018  Speech by Denis Beau First Deputy Governor  “Trends in financial intermediation and implications for the regulation and supervision of the European financial sector”  1/9  Ladies and Gentlemen, dear students, It’s a pleasure to be at the Aix-Marseille School of Economics today to discuss the trends affecting a key channel of the financing of the real economy: financial intermediation. This topic is well chosen the year of the tenth anniversary of both Lehman bankruptcy and Nakamoto’s paper underlying the Bitcoin. This is not just a coincidence. For crypto-assets’ proponents, the “old world” of bank-centric financial intermediation failed in 2008 and had to be replaced by disintermediated peer-to-peer systems like Bitcoin. Where do we stand now? Central bankers, regulators and supervisors have worked to strengthen the traditional bank centric model of intermediation, and the highly intensive finalisation of Basel III has concluded ten years of regulatory efforts in that field. Banks are stronger and more resilient than before 2008. At the same time, quite ironically, the Bitcoin itself has generated the biggest bubble ever, which is now bursting. So, in 2018, are there new developments in financial intermediation? Yes, indeed. A number of factors contribute to push the European bank-centric model towards a more diversified, unbundled financial intermediation model. Hence, I will focus the first part of my presentation on those drivers and their impact on financial intermediation (I).
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.