Thank you, Ms. Milborn, for your introductory remarks. I would also like to thank the financial supervision authority for the kind invitation, which was extended to me by Helmut Ettl and Eduard Müller.
I am pleased to participate in this year’s FMA Supervision Conference.
"A solid, resilient, inclusive, and diversified financial system promotes economic growth, creates opportunities, and is an essential element for sustainable job creation—and thus, in developing countries, for poverty reduction."
"Our environment is changing faster and faster—due to digitalization, fintech, and other technological innovations, as well as global challenges. As a result, the risks we face have also become more challenging than ever before."
"Today, I will outline the World Bank’s perspective on these opportunities and challenges and discuss how we can build a financial system that contributes to prosperity during times of uncertainty."
First: "Let me begin with financial stability."
"A strong banking system and capital markets enable funds to flow into the most productive areas and assist governments in raising investment capital. They also ensure the maintenance of financial safety nets and facilitate the safe transfer of funds across borders."
"Our new World Bank report 'Finance and Prosperity' shows that financial sector risks in emerging markets are distributed along income lines. Of course, one must distinguish between low-income countries and emerging markets. In low-income developing countries, financial systems are still relatively underdeveloped and are also exposed to higher financial sector risks. These risks arise from high levels of public debt and external imbalances. In contrast, emerging markets have further developed their financial systems and have proven relatively resilient although there is still room for improvement here."
"We believe that many positive capital market reforms have been undertaken in recent years in emerging markets in Europe Central East Asia Latin America Pacific region." However: "The outlook for the financial sector in these regions is influenced by implementation these reforms ongoing effects Russia's invasion Ukraine economic developments China."
"The increasing involvement of banks government bonds emerging developing countries good thing but it can also be double-edged sword particularly low-income countries."
"On one hand these countries increasingly represented government bond markets Between 2012 2023 domestic banks increased exposure from average 12% 16% bank assets increase more than 35% now almost three times higher industrialized countries." "In countries very high public debt exposure even rose more than 50% from 13% 20%. In ECA region slightly lower at 14%, nevertheless increased by 25% since 2012." "On other hand increasing presence must align debt-servicing capacity particularly important heavily indebted countries."
"A moderate increase government debt held banks sign healthy development however public some middle-income reached historic highs."
"If engagement government bond business not firmly embedded strong management sustainability analysis could face increased risk combined crises historically costly." "Analyses show example outbreak reduce real per capita income up average compared pre-crisis levels."
Second: "What consequences should drawn first point? What regulatory supervisory authorities do context?"
"First foremost sound fiscal policies other measures needed maintain sustainability macroeconomic stability." Banking regulators: "Can play important role helping reduce taking concrete steps promote better risk management strengthen resilience crises"
"Another important approach would be strengthen governance operational independence supervisory regulatory authorities." Standards holding portfolios guided international best practices principle applied measures deepen prevention mitigate stability"
"We consider aspects very important reason provides extensive technical assistance member Central Eastern Southeastern Europe strengthen frameworks line standards European Acquis"
Third: Sustainability
"Sustainable crucial long-term positive development regard refer connection climate crisis"
"As know front lines progress integrating frameworks inconsistent uneven assessment disclosure practices infancy Only taxonomy sustainable so-called Finance taxonomies compared three-quarters OECD economies"
"Facing significant gap Only flows reach excluding China Adaptation financing measures particularly underfunded finance opposed mitigation finance"
"This highlights importance developed drive increase domestic But must play key dominate accounting National multilateral institutions such regional Asian AIIB critical maximizing concessional mobilizing private investment"
"Some pioneering innovative approaches managing related risks example supporting central strategies address integrate broader framework successfully address numerous impacts need broader support beyond sector"
Fourth: Innovation
"Innovation key achieving expanding access promoting inclusion means useful affordable products services everyone Innovations transforming everywhere especially consumers improves reduces transaction costs remittances essential significantly increases user convenience example India Brazil low-income Kenya Cote d’Ivoire sub-Saharan e-money enabled remarkable inclusion leads efficiency gains Today interactions occur channels driven enables groups cope impacts distribute aid payments efficiently survey shows account holders risen sharply past decade adult population largely due Despite progress remains overcome gender educational geographical disparities must forget billion adults access banking gaps exceed percentage points quarter formal fewer insurance businesses particular account jobs obstacles accessing credit Aside contribution make bringing effectively manage associated There much authorities untested models entrants interdependencies challenge stability anonymity poses threat laundering terrorism financing use component regulations collected purposes Another over-indebtedness aggressive sales alternative data-based models supports responsible adoption supporting Western Balkans implementing faster systems enable cheaper interoperable promoting effective integration Single Area SEPA Fifth absolute importance global cooperation Without succeed works partners including setters organizations national share knowledge promote adoption provide assistance facilitate exchange experiences opportunity express sincere thanks Austrian supporting Advisory Center FinSAC established Vienna help aftermath Over past carried projects organized conferences workshops played strengthening combat laundering terrorist Through membership Action advocated stricter requirements ownership transparency recovery criminal leading efforts appropriately tailor standards Group industry recently co-organized IMF consultation ensure payment maintaining inclusion technological Given rapid changes oversight governance collaboration essential holds immense potential growth prosperity carefully manage both opportunities come innovations effects uncertainty crucial regulators supervisors leaders promote crisis-resistant supports inclusive International coordination cooperation essential count active role regard Thank you much.
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