Chiara Scotti: Regulator or researcher hat? The interconnectedness case

Speech by Ms Chiara Scotti, Deputy Governor of the Bank of Italy, at the European Banking Authority Policy Research Workshop, Paris, 6 November 2024. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

A number of remarkable developments have changed the financial landscape over the past decade. I am pleased to see that the rich programme of this year's conference hosted by the European Banking Authority covers some important ones. In my keynote speech today, I will start by looking at three areas of change as conduits to highlight what a difficult job I have got myself into and how I go about disentangling the sometimes conflicting forces and signals that come from wearing different hats: that of a regulator and that of a researcher.

First of all, new technologies have been changing the way we do business, shop, pay, etc. Technological innovation has made it possible to offer new products and services (e.g. digital assets and services), and to offer old products and services in a different way (e.g. online banking). While technology has become increasingly central to the production function of financial firms, IT services are often provided by a few large third-party providers outside the financial industry (and often outside the regulatory perimeter), with a rise in the potentially systemic linkages within and among the financial, technological, and more traditional sectors. 

Second, the volume of assets intermediated by non-bank finance has increased over time. If we look at the European Union, an area once characterized by a clearly bank-centred financial system, the total assets of non-bank financial intermediaries (NBFIs) now exceed banks' total assets. While the expansion of non-bank finance has a number of positive effects, it also poses potential risks. NBFIs are often less regulated than banks, although they perform similar functions; the rules are not always sufficiently harmonized, both globally and at EU level; and finally, NBFIs are deeply intertwined with banks, and increasingly so with digital players, products, and services.