Key Highlights from Gabriel Makhlouf, Governor, Central Bank of Ireland's Address at the Singapore FinTech Festival
Economic Outlook and Inflation:
- Global inflation is easing, with the Euro area on track to achieve the 2% target by 2025.
- Managing inflation requires a steady, cautious approach, particularly as services inflation remains elevated.
- A new normal of economic volatility is expected, driven by global fragmentation, demographic shifts, technological change, and climate challenges.
The Role of Central Banks in a Changing World:
- Central banks must adapt to a rapidly evolving landscape, marked by events like the global pandemic, geopolitical tensions (e.g., Russia’s war in Ukraine), and rising conflicts.
- Central banks are navigating an era of unprecedented innovation and complexity.
- Despite these challenges, fundamental principles like governance, risk management, and consumer protection remain crucial.
- Technological Innovation in Finance:
- The financial system is undergoing significant transformation, heavily influenced by technological advancements.
- Ireland’s financial sector has expanded rapidly, benefiting from EU membership, an open economy, and a skilled workforce.
- Notable changes include:
- A fourfold increase in authorised payment firms.
- The rise of electronic payments and demand for instant transactions.
- New tech-driven business models, such as partnerships between payment and credit providers.
- Technologies like blockchain, cloud computing, and enhanced data analytics are reshaping financial services.
Regulatory Approach:
- The Central Bank of Ireland’s strategy is based on six core principles:
- Forward-Looking: Anticipating future challenges and opportunities.
- Connected: Collaborating with peer regulators, industry, and the public.
- Proportionate: Balancing benefits and risks without compromising key standards.
- Predictable and Transparent: Providing clarity for regulated entities, even in uncertain times.
- Agile: Embedding adaptability into everyday operations, not just in crises.
- Preparing for Future Innovation:
- The Central Bank is focused on understanding and managing technological advancements to harness their benefits while mitigating risks.
- Establishing a new sandbox programme to explore financial innovation and improve regulatory approaches.
- Emphasis on collaboration with global regulators to ensure a balanced and secure financial environment.
- Upcoming Regulatory Priorities:
- Implementation of the EU’s Digital Operational Resilience Act.
- Adopting regulations for crypto-assets under the Markets in Crypto-Assets Regulation (MiCA).
- Strengthening capabilities in areas like artificial intelligence and tokenisation.
- Modernising Payments and Digital Currency:
- Modernisation of cross-border payment systems is essential for efficiency.
- The digital euro initiative aims to provide a secure, accessible digital form of cash, blending traditional cash benefits with digital convenience.
- Final decisions on the digital euro will depend on the legislative framework set by European authorities.
Conclusion:
- Central banks must act as stabilising forces during turbulent times, but they must also embrace innovation.
- Effective regulation and collaboration are key to shaping a resilient financial system.
- The ultimate goal is a well-regulated financial sector that supports consumers, businesses, and the wider economy while fostering technological advancement.
Watch Full Session
Speaker:
- Gabriel Makhlouf, Governor, Central Bank of Ireland