Financial stability

1. The question and the scope

At the ECB's conference on money markets, Pablo Hernández de Cos asks how large the lasting footprint of a monetary authority's assets and liabilities should be once crises have passed. These portfolios swelled after the 2008 crisis and the pandemic, and have been shrinking in the euro area since 2022 and in many other economies. He sets aside emergency episodes and the lower-bound problem, concentrating on the reserves that commercial banks hold at the central bank. Two forces set their level: the operating framework, which fixes supply, and banks' own demand. Because financial systems, institutions and objectives differ, countries can reasonably draw different conclusions.

2. Operating frameworks

Frameworks differ by where supply meets the demand curve. In a corridor or scarce-reserves system, supply sits on the sloping part and banks forgo a positive return when they park reserves overnight, as in Brazil, India or Korea. Ample or abundant systems, such as the euro area's, push the market rate toward or below the deposit rate. Tiered designs pay a lower rate above a quota; Switzerland uses one to keep trading alive despite plentiful reserves. The ideal opportunity cost is debated: a textbook rule favours cheap, plentiful reserves, yet a large central bank footprint can distort allocation and crowd out private markets, while abundant liquidity can head off forced asset sales and scrambles for cash. Both effects coexist, so the net balance is hard to judge.

3. Monetary control and market functioning

Every framework can steer the policy stance, but with high reserves the operational target stays closer to the policy rate, since swings in currency demand or government deposits need no offsetting forecasts; scarce systems must intervene, though deviations are only a few basis points and do not seem to spread to other short rates. Plentiful reserves also let a central bank add liquidity without disturbing rate control. As reserves become abundant, trading incentives fade and interbank activity can wither; in Sweden around half of counterparties have taken part in no money market segment since 2020. Tiering sustains trading. Views differ on how much interbank turnover matters, since secured markets stay busy and supervision can supply discipline, and a recent ECB study finds unsecured lending carries higher regulatory costs than collateralised lending, though Japan's unsecured market recovered after tiering.

4. Financial stability

Abundant-reserve systems supply liquidity in advance, scarce ones provide it after stress appears, often at penalty rates against strict collateral. A large reserve cushion helps banks absorb shocks, lowers reliance on frozen interbank lending, forced sales of other liquid assets and emergency facilities, and trims banks' holdings of government bonds, weakening the sovereign-bank link. In stress, fragmented markets can leave some banks short at day's end. Yet the system may adapt to abundance in ways that raise fragility.

5. What drives reserve demand

Demand has risen over the past decade. Liquidity rules matter in different ways: intraday requirements or supervisory pressure behave like reserve requirements, whereas the standard coverage ratio can be met with other liquid assets, so it shows little link to reserve levels; reserves merely take a larger share as their opportunity cost falls. Frictions raise the insurance value of reserves: selling other liquid assets takes time, runs have become faster as the 2023 turmoil showed, borrowing from the central bank can carry stigma or lack operational readiness, and non-bank institutions may amplify swings in stress.

6. Endogenous effects and open questions

Demand may respond to the framework itself. When markets fragment, inactive banks act like autonomous factors whose payment flows move effective demand unexpectedly, and Swedish banks raised precautionary buffers as supply grew. High reserves may also encourage banks to take on more uninsured deposits and credit lines, leaving them more exposed if liquidity shrinks. Whether such effects can be undone as balance sheets fall is unresolved, though recent experience, including the euro area's, suggests a smooth reduction is achievable.

1. What deposit insurers do today

Speaking in Berlin to the international association of deposit insurers, Pablo Hernández de Cos recalls that the purpose of insurance is to protect less sophisticated savers and sustain public confidence, though a state backstop or central bank liquidity could also do part of that job. Industry funding remains central because it spreads failure costs among banks, and the old worry that insured banks take more risk has been answered by capital rules and resolution regimes that put losses on owners and creditors. Mandates have widened: over 80% of members now play some role in resolution that keeps deposits accessible rather than only paying out.

2. Funding failures

Banks' own loss-absorbing resources should be the first line, as international standards require for the largest banks. But resolution costs are unpredictable, loss-absorbing buffers can be depleted before failure and they do not suit every business model, notably smaller banks. Industry-funded schemes therefore stay vital, as the recent European reform widening their use in resolving small banks illustrates.

3. Three sources of new risk

Crisis tools were built around bank solvency and liquidity stress, so he sketches three areas to review. Risks can arise outside the regulated perimeter, as shown by the Archegos collapse and the 2022 UK gilt disruption, which calls for understanding how stress spreads and possibly access to central bank liquidity for some non-banks under proper oversight. Technology makes runs faster, as the Silicon Valley Bank failure showed, and raises the odds of severe cyber or third-party outages for which authorities need a joined-up plan. Finally, new forms of money could matter if adopted widely.

4. Stablecoins and tokenised deposits

Protection exists because deposits fund credit and carry run risk, and because they are redeemable at par and dominate payments. Asset-backed stablecoins lack stable value and the credit link, so the core rationale is missing; yet a run could force fire sales and bank withdrawals, so safeguards on reserves, capital and holders' legal claims matter, and a 2025 review found major implementation gaps. Tokenised deposits stay tied to a bank and credit provision, so logically they should receive the same protection. Whatever is decided must be explained clearly to avoid public confusion, a task where deposit insurers have proven skills in raising awareness.

5. Conclusion

Over a quarter century deposit insurance has become a core part of the safety net and is moving closer to failure management. Because technology is advancing fast, crisis frameworks must change to handle new risks. Yet proven success against contagion does not mean every product with deposit-like features deserves cover; extension should depend on whether the product delivers a comparable benefit to society. The association has already updated its core principles and published work on digital products, business models and players, which should feed the day's discussions.

1. Beyond scale: what growth should achieve

Addressing the twenty-first edition of Malaysia's flagship Islamic finance forum, Bank Negara Malaysia Governor Abdul Rasheed Ghaffour argued that after decades spent building credibility, sophistication and size, Islamic finance should now be judged by what its growth makes possible. Climate pressures, ageing populations, broader development needs and a fragmented geopolitical order are changing what economies ask of finance.

2. A historical yardstick

He pointed to the Ottoman külliye complexes, where endowments funded schools, hospitals, libraries, welfare and trade around a mosque, and said such ecosystems were valued for the education, health, mobility and community wellbeing they sustained across generations. Resources mattered, but results mattered more. Success should therefore move from assets to outcomes, from compliance to the purpose behind the rules, and from the growth of finance to growth that finance enables.

3. Finance that empowers

Small firms generate almost 40% of Malaysian output and nearly half of jobs, yet face obstacles beyond credit. The social finance scheme iTEKAD combines funding with protection, skills and market access and has reached close to sixteen thousand participants; a home-based food entrepreneur who grew online and began exporting illustrates the intended result. Because every lending decision shapes the economy, capital allocation is an act of stewardship, and risk-sharing products, promoted through the i-CITA platform, should target food security and climate resilience.

4. What the central bank will do

The bank will enable responsible innovation, notably through its digital asset hub, review the Shariah contract framework with a strategy paper and exposure draft due this year, and carry the outcomes focus into the next financial sector blueprint. Three priorities follow: align capital with purpose, design products around the needs of underserved households and halal small firms, and keep fairness, integrity and empathy at the centre, with the higher objectives of Shariah as the compass.

1. Why resilience matters now

Opening the Green Swan Conference in Manila, Banca d'Italia Governor Fabio Panetta said climate change has stopped being a distant threat: it already shapes economic and financial conditions. Cutting emissions remains essential but cannot remove physical risk, and some damage is now unavoidable, so resilience must be built through three tasks: understanding risks, sharing them and reducing exposure. The costs are visible in weaker productivity, lost capital and strained budgets, with extreme weather causing over two hundred billion dollars of direct damage in 2025, more than double the early-2000s level, and shocks that can also move inflation, hitting emerging economies hardest. Governments lead climate policy; central banks and supervisors should simply keep meeting their existing mandates in a changing environment.

2. Understanding the risk

Data on physical climate risk remain patchy in availability, quality and comparability, while hazards are local, arrive in bursts and become harder to predict from history as extremes change. That makes them hard to measure and price, and better information also steers capital towards the places needing adaptation most. Financial institutions should fold climate into credit, market, operational and insurance risk instead of treating it as a separate compliance task. Artificial intelligence can sharpen modelling, forecasting and early warning, but it cannot replace reliable data, sound models and human judgement.

3. Sharing and absorbing the risk

Much of the loss from natural disasters is uninsured, so households cannot rebuild, firms stop producing or default, governments pay after the event and the shock reaches banks. Properly priced insurance does more than compensate: it rewards prevention. Yet cover is hard to expand, because people underestimate risk, premiums can be unaffordable and some markets are thin. The answer is a layered system: private insurers take smaller, frequent losses, reinsurers larger diversified ones, and public backstops handle extreme events while keeping prevention incentives, an approach developed under Italy's 2024 Group of Seven presidency and reaffirmed this year. Catastrophe bonds can widen the capital base, and Italy has introduced compulsory cover against floods, earthquakes and landslides for non-farm firms, with a public backstop. Premiums must stay affordable and reflect risk.

4. Reducing exposure through adaptation

Prevention matters most where exposure is high and fiscal room is thin, because rising debt limits adaptation spending and weak adaptation worsens public finances, a climate-debt spiral. Adapting is cheaper than rebuilding repeatedly, yet it is badly underfunded in emerging economies, held back by few investable projects, uncertain regulation and weak institutions. Governments should build resilient infrastructure, set planning standards and publish hazard information, while development banks use guarantees and blended finance to draw in private money. Technology helps with forecasting and monitoring, but growing data centres raise demand for energy, water and raw materials.

5. Conclusion

Understanding, sharing and reducing risk reinforce one another, and no institution can deliver them alone: governments, insurers, businesses, development banks and central banks each have a part, and international cooperation is essential because shocks cross borders. The aim is for economies to absorb climate shocks without them turning into wider crises; preparing for the future starts with building resilience now.

1. A broadening shock

Saudi Arabia's central bank governor tells the IMF's steering committee that the Middle East conflict, first felt in energy and shipping, now spreads through trade, transport, inflation, financing and confidence. Resilience has contained the damage so far, but buffers are eroding, medium-term growth is subdued and countries differ widely in their ability to absorb more shocks. Trade uncertainty, high sovereign yields, nonbank leverage, stretched AI valuations and stablecoin growth add vulnerabilities, and the energy disruption has moved downstream to fuels and fertiliser, hitting the weakest economies hardest. Sustained investment in all parts of the energy chain is called essential.

2. Policy advice

Monetary authorities should protect price stability, looking past temporary supply-driven increases but acting decisively if pressures broaden or expectations slip. Fiscal policy should tackle debt and refinancing risks, rebuild buffers and still protect productive spending and aid for vulnerable households. Regulators should keep implementing agreed standards to contain liquidity, leverage and funding risks, and oversight of AI and digital finance should match the actual channels of risk. Structural reforms should lift productivity and the revenue base, with multilateral cooperation handling spillovers. Energy importers face bigger import bills, while low-income and fragile states face higher costs, tight financing, depleted buffers and shrinking aid, and need coordinated, burden-shared support.

3. The Fund's role

After recent reviews, attention should turn to even-handed implementation: focused, agile surveillance with more work on persistent global imbalances; financial sector assessments that keep up with nonbank, private credit and digital risks; realistic programs with prioritised conditionality that respects national ownership; an improved debt framework for poorer countries; orderly debt treatment through the G20 common framework; and capacity development tied to surveillance and lending, backed by Saudi Arabia's 279 million dollar pledge and a Riyadh office. The Fund should also analyse AI and stablecoins more closely. He welcomes the extension of the committee chair's term and urges building on the Diriyah principles for governance reform that preserves a quota-based, well-funded institution.

4. Saudi resilience

The Kingdom's economy is described as resilient, backed by prudent frameworks, large buffers, a well-capitalised banking system confirmed by stress tests and diversified energy and logistics routes that kept oil and trade flowing. Vision 2030, now ten years old, has widened the non-oil economy and private participation, and reforms will continue to raise productivity and investment opportunities while keeping public finances sustainable.

1. Growth and fiscal stance

Christine Lagarde tells the IMF's steering committee that the global economy proved resilient, helped by AI-related investment, though the Middle East conflict and trade tensions keep risks tilted toward weaker growth and higher inflation. Euro-area staff expect 0.9% growth in 2026, then 1.4% and 1.5%. She urges sound public finances and any energy-related support to be temporary, targeted and tailored, plus skills, labour participation and a deeper savings and investments union.

2. Inflation and rates

Headline inflation reached 3.8% in September on energy, with core at 2.5% and wages unmoved so far. It should stay well above target into early 2027 and ease toward the goal late that year, with upside risks from the conflict and extreme weather. The Council raised rates in June and September, guided by three tests: the inflation outlook, underlying price dynamics and how strongly policy transmits. Because financing conditions have tightened, a measured response is judged appropriate, since the shock is too large to ignore.

3. Financial stability and payments

Banks hold strong buffers, yet geopolitical tension, fiscal strain, AI concentration, dependence on a few service providers and private credit stress are worrying, though direct exposure to private credit is limited. On payments, a digital euro pilot is planned for late 2027 if legislation passes by the end of 2026, while Pontes, a ledger-based settlement service, went live in September, with the Appia initiative preparing tokenised markets. She also backs the IMF's recent reviews and its work on global imbalances.

1. Resilient so far

Bank of England Governor Andrew Bailey said the financial system has held up despite the Middle East conflict, high bond yields and new AI-related exposures, crediting post-2008 reforms often criticised as burdensome: banks are well capitalised and markets have kept functioning. Yet slower growth, one supply shock after another and a different make-up of markets leave no room for complacency.

2. A policy dilemma

Slower productivity and a rapid series of shocks (Covid, Ukraine, the Middle East) may be the new normal in a more geopolitical world. Supply shocks raise inflation while cutting output; central banks can look through them only if expectations stay anchored, which is harder after years of high inflation. Rate rises can then coincide with falling incomes and asset prices, and repeated shocks push public debt up, so governments find it harder to cushion downturns.

3. Fragile bond markets and the response

Government bonds are now held more by leveraged, price-sensitive investors than by long-term holders, so forced selling can spread across countries and assets. He proposes faster sustainable growth, including safely deployed AI, whose financing also carries risk; credible frameworks, with a firm inflation commitment, clear explanation of policy under different scenarios and credible fiscal rules; and sturdier core markets through more central clearing, minimum haircuts and better risk management.

1. Why growth matters

At a Brussels forum of bankers and employers on 7 October 2026, Eurogroup President Kyriakos Pierrakakis argued that Europe, despite its wealth, skills, single market and large savings, is growing too slowly. Faster growth means better jobs, wages and public services, and lets firms invest in machines, digital tools and AI. It has also become a matter of geopolitical strength, as Europe must fund defence, energy security, critical technologies and infrastructure.

2. The financing gap

With an ageing workforce, growth must come from productivity and therefore investment, estimated by Mario Draghi at around EUR 800 billion more each year. Public budgets cannot cover it. The paradox, he says, is that Europe has ample savings but a financial system still split along national lines, so many firms cannot raise capital to grow. The Savings and Investments Union aims to link those savings to productive firms across the single market.

3. Banks and the unfinished Banking Union

Because banks still provide about 70% of business finance and are vital for small firms, he says the savings union cannot succeed without completing the Banking Union. European banks are now sound and helped absorb recent crises, but the market remains national: barely 16% of loans to euro-area companies are made across borders, and rules still trap capital and liquidity inside countries. He describes this fragmentation as a hidden levy on scale, investment and innovation, made more costly by technology: large US banks spend more than twice as much on IT relative to assets.

4. Three priorities and the political challenge

He calls for integration (fewer barriers to cross-border mergers and to moving capital within groups), trust (crisis management, funding for banks being wound down and a step forward on a common deposit guarantee) and competitiveness (simpler, more proportionate and consistent supervision rather than looser rules), while keeping room for strong regional banks serving small firms. The economics are well understood, he says; the obstacle is political, as each country guards its own safeguards. He sees the Eurogroup's role as building trust and compromise, and stresses urgency because investment and AI decisions are being made now.

1. Geopolitics as the common thread

Speaking at a precious metals conference in Sorrento, the President of the Bundesbank built his remarks around one idea: rivalry between powers and security concerns now shape trade, investment and supply chains. This affects the growth outlook, the conduct of monetary policy and the way central banks choose their reserve assets, including gold.

2. Growth: resilient but exposed

Despite the war in the Middle East and disrupted shipping through the Strait of Hormuz, world growth and trade have held up, helped by heavy spending on artificial intelligence infrastructure. Euro area activity surprised on the upside; the September staff projections put growth at 0.9% in 2026 and about 1.5% in 2027 and 2028, driven increasingly by household spending and by investment in digital tools, energy security, the green transition and defence. Germany is in a slow recovery, with growth near 1% this year supported by orders, industry and public spending. The outlook nevertheless depends closely on trade, energy prices and confidence.

3. Monetary policy and the energy shock

Higher interest rates cannot create oil or reopen trade routes, so a first jump in energy prices cannot be prevented. The real question is whether the shock fades or spreads into wages and prices; in the second case, policy must stop it from feeding on itself. Euro area inflation is projected at 3.0% in 2026, falling to 2.5% in 2027 and 2.1% in 2028, with underlying pressure still strong and risks tilted upwards because of low gas storage, damaged refineries and threats to food supply. As there is no clear sign yet of contagion to wages and long-term expectations remain near 2%, the ECB raised rates by a quarter point in both June and September, bringing the deposit rate to 2.5%. Decisions will stay data-driven and taken one meeting at a time.

4. Gold as anchor, then in retreat

Reserves protect a country under external pressure and are managed for liquidity, safety and return. Gold differs from foreign currency holdings because it depends on no issuer. Under the post-war Bretton Woods system it anchored the monetary order and made up almost 70% of world reserves in 1950, much of it held by the United States. Doubts about dollar convertibility helped end that system; gold still represented close to 60% of reserves in 1979. Over the following three decades its share fell to about 10% by 2009, as central banks sold gold, built large foreign currency reserves (Japan, then China) and preferred interest-bearing government bonds in a world focused on integration and cooperation.

5. The return of gold

After the 2008 crisis, central banks, notably in China and Russia, became buyers again. Low bond yields reduced the cost of holding a metal that pays no interest, and geopolitics gained weight: gold serves as a refuge in stress and, held at home, cannot be frozen by sanctions. Its share of global reserves rose to about 14% in 2023 and, mainly because of the price surge, to nearly 25% by 2025. Higher bond yields make bonds more attractive again, but rising public debt and lasting geopolitical risk keep a strong case for diversifying into gold. He closed with a line from Tasso to suggest that the worth of gold lies in the use people give it.

1. The question

In the SUERF annual lecture in Vienna, BIS General Manager Pablo Hernández de Cos asked how changes in public finances, market structure and technology will alter what central banks can and should do when the next financial crisis hits.

2. What recent crises taught

From the global financial crisis, the euro debt crisis and the pandemic, he draws three lessons. Central banks were decisive: standing and emergency liquidity, emergency loans and bond buying stopped fire sales and restored key funding markets. Credibility mattered as much as money: in several cases simply announcing purchases, or offering lending that banks barely used, was enough to calm markets. But each success exposed limits. Bond-buying programmes were hard to size and explain when nobody knew how long a shock would last, and some meant to fix temporary dysfunction turned into lasting stimulus, making exit harder. And lending directly to firms, markets or non-banks during the pandemic, beyond the usual banking circle, exposed central banks to credit risk and blurred the line with government support.

3. Three forces that complicate the next crisis

High public debt: with debt near post-war peaks and large deficits, sovereign bond markets react more to fiscal doubts, and it becomes harder to tell whether rising yields reflect fiscal concerns or a market malfunction; even a well-designed intervention may then look like help for governments. Non-banks: funds and other non-bank institutions now own the largest share of rich countries' government bonds, and highly leveraged traders like hedge funds have become central go-betweens in those markets. Their short-term funding and leverage can turn fiscal news into sudden sales, as in the dash for cash of March 2020 and the British pension-fund episode of 2022, creating what the BIS calls a fiscal-financial stability nexus. Since they usually cannot borrow from the central bank, support has to take the form of asset purchases, and widening access without comparable regulation would invite moral hazard. Digital innovation: online banking and social media made the 2023 deposit runs unusually fast and let rumours spread before official messages; stablecoins could transmit stress to money markets if they had to dump reserve assets; and widespread use of similar AI models may make market reactions more synchronised.

4. Responses he proposes

He calls for a layered answer. Governments should put debt on a credible path and build buffers in good times, which reduces both the need for central bank action and the suspicion that it serves fiscal ends. Regulators should keep refining bank rules, for example by assuming faster deposit outflows and making sure banks are operationally ready to use central bank facilities, and should apply similar rules to institutions posing similar risks, whatever their legal form; options include more central clearing of government bond and repo trades, with its own risks, and well-targeted minimum haircuts to curb leverage. Central banks should design backstops that are cheap enough in stress to avoid stigma but unattractive in normal times, keep market-repair purchases clearly separate from monetary stimulus, as the Bank of England did with its time-limited 2022 operation, and set exit conditions in advance for quantitative easing. Finally, he stresses international cooperation on standards and data for non-banks, central bank swap lines for dollar funding stress, and coordinated communication, with the BIS acting as a hub.

1. Why talk about stability now

Reserve Bank of India Governor Sanjay Malhotra defined financial stability as the system's ability to keep serving households and firms through stress, and explained why he raises it in calm times: long quiet periods encourage leverage and complacency, as Hyman Minsky warned, and India took about a decade to clean up the bad loans of the 2000s. He also sees the post-Washington Consensus order under strain from fragmentation, trade curbs, supply shocks, technology and climate, which makes risks harder to model.

2. India's framework and tools

Although the 1934 central bank law does not name financial stability explicitly, he says it follows from the RBI's mandates on monetary stability and system regulation, and price stability depends on it. Because it supervises banks, non-bank lenders and payments, provides emergency liquidity and runs deposit insurance, the RBI has the tools, while a council of regulators and government coordinates. Its approach is to make the system absorb shocks rather than try to prevent them: sound capital, liquidity and governance balanced against growth; data-driven supervision and stress tests published twice a year; countercyclical measures such as higher risk weights on commercial property in 2007 and on unsecured consumer credit and bank lending to non-banks in 2023; and temporary, targeted liquidity, as during COVID, for genuine liquidity rather than solvency problems. Monetary policy is kept for prices, with stability handled by specific tools.

3. Global risks

He lists five: higher global debt with shorter maturities and rising yields, which squeezes governments, firms and banks and can trigger outflows from emerging markets; stretched valuations tied to AI, where slower investment or earnings could cause a sharp repricing; growing leverage among hedge funds and other non-banks, increasingly intertwined with banks; private credit, where some large defaults suggest loose standards; and cyber threats amplified by AI. Any one may be manageable, but several at once could strain the system.

4. India's position and priorities

India faces the Middle East shock through commodity prices but from strength, and is diversifying imports, building oil reserves, speeding up the energy transition, signing trade deals and promoting local-currency settlement. Domestic bond yields rose only partly, thanks to fiscal consolidation and credible monetary policy; equities corrected in an orderly way. New rules tighten banks' cyber governance and model risk; private credit is small and non-bank lenders are well capitalised, at 24.6% against a 15% requirement, while June stress tests showed comfortable bank capital. He ends with five priorities: build resilience to shocks that will come; map new, cross-border risks that may start outside finance through scenario analysis; collect better data on non-banks and links between institutions; extend resilience beyond banks to markets, payments and technology providers; and make sure innovation such as AI and tokenisation preserves trust, settlement finality and the singleness of money.

1. The challenge

Opening the 24th ICBS, the worldwide gathering of bank supervisors held this year in Bali with Bank Indonesia and the Indonesian financial regulator as hosts, Basel Committee Chair Erik Thedéen asked how supervisors can stay effective amid fast change: AI, cyber threats, new forms of intermediation, geopolitical tension and political pressure on independent authorities. His answer is that supervision must be both strong and modern. Critics often treat the first as rigid and hostile to innovation and the second as a polite word for leniency; he sees the two as complementary, and draws a parallel with Indonesia's history as a trading crossroads that prospered by adapting to change while keeping its footing.

2. Rules are not enough

He recalls what the post-2008 Basel III reforms achieved: core capital ratios of large banks up by over 40% since 2011 to about 14%, the ratio of debt to loss-absorbing capital roughly halved from 30 to 17 times, and liquid assets above a fifth of balance sheets, which helped banks survive the pandemic, rapid rate rises and the 2023 turmoil. He notes in passing that the public searches far more for Basel's rules than for its supervisory principles, and urges full, consistent and timely implementation of the remaining standards. But many failed banks, from Northern Rock to Silicon Valley Bank, met their minimum ratios before collapsing. Weak governance, poor rate-risk management and unstable funding were the real problems. Those hidden weaknesses later turned into losses and runs. A ratio only shows a bank's position on one day; supervision has to follow how it got there, where it is heading and how it would react to a change in conditions. Meeting minimum requirements, he stresses, does not mean the absence of risk, which usually shows up first in incentives, behaviour and concentrations, and the Committee's mandate covers supervision and bank practices as much as rules.

3. What effective supervision means

He defines it as spotting risks early, telling banks clearly what must change, and acting if they do not, all in good time, since an unresolved finding is unfinished work. Acting is hardest: supervisors need judgment to intervene before risks materialise, anchored in mandate, evidence and due process, avoiding both arbitrariness and box-ticking inertia. Because successes are invisible while failures are spectacular, supervision is accused of laxity after crises and of overreach between them; doing the job therefore takes resolve. Past failures show that warning signs were usually visible but not connected or acted upon in time. He defends judgment as a structured, evidence-based assessment that should be challenged internally, documented and reviewed afterwards, since rules alone cannot capture the specific weaknesses of each bank.

4. Capacity and modernisation

Staff, skills, data tools, legal powers, independence, culture and time are, for him, policy matters, and international assessments keep finding shortages of independence, resources and specialists. Tomorrow's supervisors will still need classic prudential knowledge but also expertise in technology, cloud, cyber, data, AI, links with non-banks and geopolitics, combining financial, technological and behavioural expertise in multidisciplinary teams, because a cyber incident can quickly become a liquidity problem and a concentrated business model can unravel when news spreads online. Modernisation should give supervisors more time to think, not just more data to process, and make supervision more forward-looking, data-driven and fast without becoming speculative or careless. Authorities compete with industry for scarce talent, yet underinvestment costs more. AI brings new risks in data quality, models, explainability and dependence on a few providers, addressed in the Committee's new third-party risk principles; small banks, most reliant on outside AI tools, must still keep responsibility in-house.

5. Commitments and cooperation

He proposes three commitments: protect mandates, independence, resources and early-intervention powers before a crisis; give staff expertise, time and backing to challenge bank leaders; and build trust by explaining how decisions are taken and evaluated, without hiding behind confidentiality. Finally, he presents international cooperation, as at the conference first held in 1979, as a form of capacity in itself, warning that fragmented supervision would breed fragmented finance and regulatory arbitrage.

1. Climate resilience as a financial issue

Closing the 2026 conference of Malaysia's Joint Committee on Climate Change, Bank Negara Malaysia Governor Abdul Rasheed Ghaffour argued that resilience to climate and nature risks is an economic and therefore financial priority, and offered three reflections.

2. Financing a credible energy transition

Renewables reached 31% of installed capacity in 2025, up from 25% in 2023, in line with the national roadmap, but AI and data centres, expected to use close to a third of electricity by 2035, will push demand sharply higher. Money exists; the bottleneck is turning it into bankable projects. His example: a remote town in Sabah running on a diesel generator next to a palm-oil mill whose methane could power it. Alone, such a project looks too small and unusual to finance, but with over 120 mills in the state it could become a model adding hundreds of megawatts. A climate finance platform has gathered 45 projects that together ask for over RM5 billion of funding, and he urges financiers to help them scale, and the central bank is studying how rules could give lenders room for well-managed, higher-risk transition financing.

3. Adaptation and nature

He wants money spent on resilience before floods or droughts rather than on repairs afterwards, supported by new national climate policies and better, more usable climate data so that uncertainty becomes priced risk. He also asks finance to value nature, on which over half of Malaysia's GDP depends, citing Singapore's choice to turn a concrete canal into a natural river park at half the cost. Banks can start assessing nature risks with existing resources, and he closes by calling for bolder capital, innovation and collaboration.

1. Credibility tested in two ways

In Kyiv, at a research conference jointly organised by the Ukrainian and Polish central banks, the Governor of the Bank of Italy expressed solidarity with Ukraine and argued that central bank credibility sometimes requires standing firm and sometimes adapting. Geopolitical conflict tests the first quality; artificial intelligence and digitalisation test the second.

2. Lessons from the hryvnia

Ukraine's currency turned thirty in 2026. After the 2014-15 crisis, when it lost over half its value and banks were restructured, the National Bank of Ukraine adopted inflation targeting, a more flexible exchange rate and risk-based supervision. These reforms allowed it to keep monetary and financial stability after the 2022 invasion: inflation passed 26%, the policy rate went to 25%, banks kept working and inflation later fell. A new four-year IMF programme approved in February 2026 recognised this record, while alignment with EU banking rules progressed. The lesson is that credibility is accumulated in calm times and proven in extreme ones.

3. AI and the economy

Generative AI is spreading faster than personal computers or the internet did. Central banks must understand it, both as an analytical tool and as a force changing the economy. In the short run, AI investment lifts demand and prices for computing power, energy and specialised staff. In the long run, productivity gains could be large; Bank of Italy research suggests more than one extra point of annual labour productivity growth for Italy. Such a supply gain would normally mean more growth and lower inflation, but its timing and size are uncertain and it also affects incomes and spending.

4. Demand, inequality and gaps between countries

Should AI chiefly generate new kinds of work and lift expected wages, households may spend more and inflation could last longer; if it mainly replaces workers, precautionary saving could bring disinflation sooner. The outcome will be uneven across workers and firms, possibly favouring large companies. Central banks will therefore need to know who gains, not only how much. Between countries, the United States leads in AI investment, which widens its trade deficit and draws foreign money into its stock market, while Europe lags but could still catch up through adoption. Faster adopters may win lasting productivity and market share, with possible swings in exchange rates whose direction is hard to predict.

5. Consequences for policy

The effect of AI on the neutral interest rate is ambiguous: faster productivity pushes it up, while inequality, extra saving or a larger capital share pull it down. Stock valuations built on optimistic AI profits leave room for abrupt corrections. He therefore recommended pragmatism, giving observed demand, activity and inflation more weight than estimates of unobservable variables, and investing in skills and models.

6. Supervision and payments

AI can improve credit scoring, fraud detection and risk control, but common models or a few technology suppliers could spread errors across the system, so supervisors need deeper technical knowledge. New payment providers raise efficiency but also complexity and cyber risk. The two-tier system, in which public money issued by the central bank anchors the private services built on it, should be adapted rather than abandoned. Stable prices, a sound financial system and public confidence in money stay the foundations.

1. Opportunity and risk together

Speaking to EU finance ministers in Dublin, Georgieva said Europe must grow faster to keep its social model and should use the current leap in technology to do so. The gains come from reinventing products, processes and workflows, not from the technology alone, and AI's pace punishes hesitation. Europe has to sit inside the whole value chain, as provider, builder and adopter, yet it now trails the United States, China and several Asian suppliers.

2. Four channels of impact

In the short run the AI building boom is a positive demand shock that lifts growth and inflation, amplified by its appetite for energy. Later it becomes a supply shock: global potential growth could rise by roughly a tenth to eight tenths of a point a year, with Europe aiming for the upper half; the inflation effect depends on timing and on whether labour disruption erodes consumer demand. It could touch up to sixty percent of jobs in advanced economies, widening polarisation and hollowing out the middle. In between lies a period of maximum risk, since disappointment tends to come first and frontier models may outrun oversight.

3. Financial stability

An AI-led market correction ranks among the risks taken most seriously. Rising leverage could force selling, circular financing between investment, debt and revenue commitments could reverse, and large cross-border holdings of American shares would spread losses worldwide. Supervisors must make sure the system can withstand that test.

4. What Europe should do

Europe will have to build AI as well as adopt it. It ranks well on readiness, with seven of the top ten countries, but firms face bank-dominated finance, heavy regulation, some of the highest power prices in the world and narrower adoption than American firms. Five priorities follow: patient risk capital and a pan-European venture industry, together with a rethink of taxation as income shifts from labour to capital; an energy union and data centres sited where power is cheap; the optional 28th corporate regime to ease entry and exit; smoother job transitions through retraining and protection of workers rather than posts, citing Finland and Denmark; and a state that leads by adopting AI and building digital public infrastructure. Europe's AI rulebook looks prescient, but guardrails only matter if there is something to guard, so competitiveness must be preserved.

1. Inflation back above target

In her opening statement to an Australian parliamentary committee, RBA Governor Michele Bullock explained that the Monetary Policy Board has raised the cash rate by 50 basis points since February, 75 this year, because inflation, after returning to the 2-3% band in 2024-25, rose again in the second half of 2025 and now runs around or slightly above 3.5%. She blames domestic capacity pressure plus the Middle East conflict, which lifts fuel prices directly and, as firms pass on costs, indirectly. Forecasts put inflation back near the target midpoint only in late 2027. Unemployment of 4.5% shows a labour market a little tighter than full employment.

2. Risks and the housing market

Upside inflation risks are materialising: global cost pressure from the Middle East, the AI boom and extreme weather; firms passing on higher input costs; and a risk that capacity strain worsens pass-through. Growth is slowing and the full effect of past rises is still to come, but business investment, mainly data centres and renewables, is strong, and weak productivity means the economy cannot grow quickly without adding inflation. Housing prices have eased but remain about 50% above early 2020, few borrowers are in negative equity and savings buffers are large, so financial stability risks look contained. She stressed that policy does not target house prices; they matter through wealth, turnover and construction. Whether tightening so far is enough will be examined at the next meeting, and she acknowledged the pain for mortgage holders while insisting that high inflation hurts everyone, especially lower incomes.

3. Payments, cash and tokenisation

On payments, card surcharging will be banned from 1 October alongside lower interchange caps and more transparent costs; a wider review of payments regulation will publish priorities by the end of 2026, covering mobile wallets, three-party schemes, direct bank-to-bank transfers and AI-agent purchasing. Project Acacia found that tokenisation plus new settlement infrastructure could improve efficiency and resilience; a consultation on the bank's own settlement system follows, a tokenisation sandbox is being explored, and there is still no clear case for a retail digital currency. For cash, about half of Australians use it weekly; a new law gives crisis powers, the cash carrier Linfox Armaguard has been designated, and the ACCC will oversee pricing and access.

4. A more open RBA

She finished by reporting that the bank has completed the remaining recommendations of its independent review, including a framework for extra policy tools and an external expert advisory group, and is committed to continuous improvement in governance, risk and resilience.

1. Strong banks, lost ground

At the Eurofi forum in Dublin, the Governor of the Banque de France observed that fifteen years of reform have left EU banks with record capital and liquidity, yet foreign groups now handle about 60% of corporate and investment banking for European clients. Solidity alone will not finance the climate transition, digital needs, defence and Europe's financial autonomy.

2. A single banking market

Cross-border loans are under 15% of euro area lending and cross-border mergers are rare, because groups must still hold capital and liquidity country by country. He called for waivers allowing groups to manage them centrally, with guarantees that parents support subsidiaries in stress, without waiting for a common deposit insurance scheme.

3. Simpler rules, not weaker ones

Simplification must not mean deregulation: Basel III was right and must stay risk-based and uniform. He proposed aligning loss-absorbing debt requirements, removing overlaps between supervisory add-ons and minimum rules, and questioning EU-specific buffers. Delaying the trading book capital rules for 2027-30 protects competition with other regions, but a lasting answer is needed.

4. Financing Europe

Better internal models justify reviewing the output floor where it duplicates other safeguards, keeping lower capital charges for low-risk mortgages and possibly some unrated firms, and easing EU-only extras on trade and specialised finance. Revised securitisation rules should also widen market funding.

1. AI as a new way of banking

Speaking at the FIBAC conference, Reserve Bank of India Governor Sanjay Malhotra said AI will mark the 2020s for Indian banks, much as liberalisation marked the 1990s and digitalisation the 2010s. It is not a product to buy but a shift in how banks assess danger, look after clients, set the price of capital and structure their organisations; the choice is whether to steer it deliberately or be shaped by it. He first recapped last year's three regulatory priorities: Basel III is on track for April 2027, regulatory burden on boards and forms has been cut, and public digital rails such as Account Aggregator and the Unified Lending Interface are lowering the cost of credit, especially for small firms.

2. Five reasons to engage

The RBI sees AI as a capability to harness, not merely a risk. He gave five arguments. Credit: models using cash flows, tax filings and utility payments can reach borrowers with no credit history at far lower cost, and spot stress earlier. Service: tools that assist, not replace, relationship managers and complaint handling. Inclusion: voice interfaces in Indian languages and early-warning models that allow counselling before default. Efficiency: automating document processing, reconciliation, audit sampling and regulatory reporting to cut costs. Fraud: machine-learning systems that learn from transaction patterns can catch anomalies in real time, where fixed rules always lag. Each bank should write its own playbook, backed by board-driven strategy and sustained investment in infrastructure, skills, partnerships and governance.

3. Seven risks

He then listed seven risks. Opaque black-box models undermine accountability when a loan is refused. Bias can reproduce historic discrimination by region, occupation or community, so fairness must be designed in from day one. Concentration and herding arise if a few foundation models or vendors underpin decisions, turning one flaw into a systemic one and synchronising trading in stress. Vendor dependence requires contracts with audit, explanation and exit rights. On data privacy, the data-protection law is the minimum, not the maximum. Cyber and adversarial attacks, such as data poisoning, can target AI defences. Finally, human judgment must not erode: blaming the model is never acceptable, so oversight and the ability to intervene and override must remain.

4. What the RBI expects and offers

Following its FREE-AI committee and draft model-risk guidelines, the RBI takes a principles-based, proportionate approach, treating innovation and safety as complementary. Banks should keep a full inventory of AI systems including vendor-embedded ones, adopt board-approved governance with clear accountability, be able to explain decisions affecting customers, stress-test and red-team models before and after launch, and keep human oversight wherever harm could result. The RBI promises consultative, evidence-based supervision, its regulatory sandbox, and shared tools such as MuleHunter and a planned Digital Payments Intelligence Platform. The winners, he concludes, will adopt AI with understanding, accountability and customer trust.

1. Potential turned into impact

At the Global Fintech Fest, RBI Governor Sanjay Malhotra said that what was once aspiration is now daily reality: roughly 570 million basic bank accounts under the government scheme, hundreds of millions of micro-insurance policies, and about 24 billion UPI payments a month. The real achievement, he said, is that digital finance became ordinary, so even a street flower seller shows a QR code. He credits public-private partnership rather than technology or officials alone. The hardest task remains the last mile: informal-sector savings, micro-insurance, small pensions and small loans for women, farmers and smaller towns, where firms too often chase customers who are already banked. Newer tools, whether AI, quantum computing or tokenisation, are only means to that end.

2. Four ingredients of trust

Trust, he said, is a daily working practice, earned one payment at a time. Recalling hundis, the handwritten merchant notes honoured across great distances on reputation alone, he argued that trust once rested on merchants, now rests on institutions and must extend to intelligent systems. His four ingredients: mitigate AI risks such as opacity and bias; treat customer data as a fiduciary duty, following the consent-based design of the Account Aggregator; accept that responsibility grows with size, so firms become too significant to be careless and must invest in resilience and cyber security; and avoid structuring a business around regulatory gaps or scaling first and seeking forgiveness later, since the sandbox exists for early engagement and rules eventually catch up.

3. A global vision

India's fintech sector ranks third worldwide by funding, with 2.4 billion dollars raised in 2025 and 30 unicorns. After a decade of building for India, he wants the next to build for the world, exporting solutions for inclusion, affordable payments, digital identity and interoperable public infrastructure, and earning leadership by having others adopt its standards.

4. What the RBI is doing

The central bank calls fintech a strategic partner. It runs an on-tap regulatory sandbox, an annual hackathon and a self-regulatory-organisation scheme, recognising United FinTech Forum as the second such body. It is building public infrastructure: the Unified Lending Interface, Account Aggregator, the MuleHunter.ai fraud detector and a proposed Digital Payments Intelligence Platform, plus pilots of programmable CBDC and tokenised certificates of deposit, and it announced tokenised corporate bonds settled in CBDC together with SEBI. Regulation stays activity-based, with the same treatment for the same risk, and light where innovation is young. New AI, model-risk and quantum-resilience work aims to anticipate change.

1. Demand, investment and trade

Speaking at the Global Fintech Fest in Mumbai, BIS General Manager Pablo Hernández de Cos organised his remarks around three questions. AI is already reshaping the global economy. On demand, it has triggered an investment boom in data centres, chips, cloud and hardware, and its optimism keeps financial conditions loose, supporting consumption through wealth effects. The five biggest tech firms alone plan over a trillion dollars of AI spending across 2025-26, and industry expects global AI investment to rise from about 500 billion dollars to 3-4 trillion by 2030, increasingly financed by debt and private credit. Trade is affected too: prices of AI-related goods have risen while other export prices stayed flat, so economies high in the supply chain, such as Taiwan, Korea, Malaysia and Singapore, gain, though narrowly (five Korean firms made 43% of export earnings), while heavy buyers of equipment lose terms of trade.

2. Productivity and jobs

On supply, task-level studies show productivity gains of 10 to 65% from generative AI, strongest for less experienced workers, and published estimates centre on roughly half a point a year added to productivity growth, with early evidence that better-prepared economies grew productivity faster. For work, AI both complements and substitutes. Informal workers in developing economies, with least protection and training, are most exposed; displacement so far is limited but emerging in customer support, programming and administration, and nearly 80% of firms discuss automation plans. His lesson is to prepare people through reskilling, not to resist the technology.

3. Divergence between economies

Advanced economies are likely to gain more in the short run because finance and professional services weigh more there and AI preparedness is higher. But emerging economies differ widely: China and parts of the Middle East are very well prepared, many low-income countries lag, and India, with its digital public infrastructure, has a real chance to close the gap. AI production is a five-layer chain (chips, cloud, data, foundation models, applications) with high fixed costs and scale economies, favouring a few giants in the US, China, Taiwan, Korea and the Netherlands. Smaller economies face a trade-off between building national capacity for resilience and wasteful duplication; many can focus on local applications, models for local languages and domain data.

4. Central banks and financial stability

The mandate is unchanged, but AI makes the economy harder to read, making it harder to pin down how much the economy can produce and where neutral interest rates sit. The BIS sets out three long-run scenarios: a bounded productivity boost, explosive self-improving growth, and a demand bottleneck in which displaced workers, as lost consumers, eventually starve the spending that supports innovation; in the last, the natural rate first rises, then falls below pre-AI levels, with inflation following. Financial-stability worries include cyber risk, which tilts towards attackers, and the investment boom itself: valuations are concentrated, spending exceeds cash flow, and circular financing among chipmakers, cloud firms and AI developers is opaque. An arms race risks over-investment, as in the canal, railway, electrification and dot-com episodes, and households now hold more equity, so a correction could hit consumption harder and spread globally. He does not say a bust is inevitable but urges caution. Benefits will depend on infrastructure, skills, competition, data governance and institutions; for central banks, the premium rises on measurement, judgment and cooperation.

1. The question of legitimacy

Speaking at an LSE conference, the Governor of the Bank of England examined independent central banks as institutions. He recalled that in 1780 a young Alexander Hamilton admired how the Bank of England combined public authority with private credit. Since central banks shape borrowing costs, savings, jobs and financial stability, critics ask why unelected bodies should hold such power: some say they serve financial interests, others that they ignore citizens' wishes. He set out to answer by tracing the ideas behind them.

2. Two intellectual traditions

Economists usually justify independence by credibility: governments are tempted by short-term monetary choices and tend to neglect financial stability until a crisis is near. Bailey went further back. Montesquieu wanted intermediate bodies, such as courts and parliaments, to restrain arbitrary power, though their authority grew from long-standing roots. A second line of English thought moved money away from the sovereign's control: Hobbes saw monetary power as part of sovereignty, while Locke, in the coinage disputes of the 1690s, argued that changing money's value at will destroyed trust and trade, and Hume presented stable money and credit as foundations of commercial prosperity. Monetary stability thus became a public good.

3. The early Bank of England

The Bank was founded in 1694 to support expanding commerce and to fund war with France. It began as a deal between the state and a small circle of wealthy financiers and was deeply involved in politics; writers at the time feared that public debt would give financiers power without legitimacy. Central banking therefore evolved slowly, and its origins resemble Mancur Olson's organised interest groups more than a neutral public institution.

4. Public good, not group interest

Modern central banks combine both traditions: they limit the misuse of power over money and protect a good shared by all. Drawing on Brian Barry, Bailey distinguished competing private interests, which democracy arbitrates, from goods that matter to everyone, such as the value of money. Interest rates and financial rules do affect groups differently, but their purpose is to preserve conditions for lasting prosperity. Lacking deep social roots, a central bank must avoid being captured by any sector or movement. Its legitimacy comes from Parliament, which sets its goals and powers and can change them.

5. Today's challenges

Trust in public bodies is falling. Critics say central banks are too close to finance, while banks complain that regulation has gone too far; criticism from both sides does not prove the bank right, but shows that independence means resisting organised interests. Populism is a second threat: by claiming to embody the whole people, it erases the line between public interest and public good and treats independent bodies as obstacles. Central banks must therefore explain their choices, engage with the public and answer to elected representatives, in Britain the Treasury Committee.

6. Conclusion

Scrutiny is healthy. Prosperity depends on confidence that money keeps its value and the financial system holds. Independence means protection from short-term political pressure inside a democratic framework, resting on delegation and accountability, which should be strengthened through transparency and openness. Households, firms and markets all plan on the basis of stable money, and such trust takes generations to build but can be lost quickly, which is why he argued that the foundations of independence should be reinforced rather than weakened.

1. Shocks and weaker growth

Addressing the Bangkok Business Summit, Bank of Thailand Governor Vitai Ratanakorn noted that shocks now arrive faster, and each has left Thailand on a lower growth path: average growth fell from 5.3% after 1997 to 3.7% after 2008 and 2.4% after the pandemic. Ahead of the IMF-World Bank meetings in Bangkok, he framed the theme of new horizons, empowering people and building resilience, around four pillars: digital and AI transformation, resilience in a fragmented world, climate-adaptation finance, and demographic change and the longevity economy.

2. The other three pillars

Thailand can be a trusted hub: though not the cheapest location, it offers stability, and over five years foreign direct investment into the country rose 20.9% while global flows fell 4.2%. Small firms need help adjusting. On climate, the central bank's transition financing and Thailand Taxonomy have supported over 750 businesses and mobilised more than 210 billion baht, with the taxonomy covering six sectors that account for 95% of emissions. Ageing opens opportunities in healthcare and wellness.

3. Digital finance and fraud

Thailand's free instant-payment system PromptPay has 83 million accounts and handled 2.51 billion transfers in July alone, and the Paotang app built on it reaches over 40 million users. But scams are growing: Asia suffered close to 66% of the world's scam losses in 2024, Thai fraud cost over 43 billion baht (about 0.2% of GDP), and attacks on banks rose roughly 45% in 2025. With the IMF and World Bank, Thailand drafted the Bangkok Blueprint, twelve considerations for fraud-resilient finance. Security standards cut money-draining apps to zero, and later measures against authorised push-payment fraud (tougher scam-account rules, money tracing, daily transfer caps, shared-responsibility guidelines) cut such losses almost 80% from the 2024 peak.

4. Cutting off illicit money

Since fraud proceeds exit through cash, gold, foreign exchange and stablecoins, the bank limited large cash withdrawals (down 52%), tightened online gold reporting (large withdrawals down 70%), strengthened oversight of currency exchangers and, with the SEC, tightened rules for digital-asset trading. A new framework of commitments across banks, e-payment firms, lenders and money changers will be reaffirmed next week, because a secure system is a strategic asset.

1. From saving the world to resilience

Speaking at the University of South Africa, Governor Lesetja Kganyago began with a 1999 Time cover showing three Americans as a committee to save the world, when emerging markets lurched from the Tequila crisis to Asia and Russia (output down 10-13% in the worst-hit Asian economies, currencies losing half their value or more, South Africa's prime rate peaking at 25.5% and its reserves exhausted defending the rand). That view of emerging markets as fragile and dependent on Washington has passed its expiry date: the 2007-09 crisis began in the US, while a core group, among them Mexico, Brazil, Thailand, India, Indonesia and his own country, has gone decades without defaults, IMF bailouts or currency collapses, thanks to home-grown reform.

2. How resilience was built

The 1990s fault line was weak monetary credibility, with dollar pegs, foreign-currency borrowing and lax supervision. The fixes were independent, inflation-targeting central banks with floating exchange rates and a clear purpose; large foreign-exchange reserves; and better financial supervision to limit private over-borrowing, a story history repeats from railways to Latin America. Capital-flow measures, despite the debate, mattered little. Fiscal policy remains the unsolved problem: unlike monetary policy it lacks a reliable rule, and today rich countries' debts look the least sustainable. Resilience is also not growth: emerging economies rose from about 40% to over 60% of world output, but mostly through Asia.

3. South Africa: strength and a silent crisis

South Africa fits the pattern: an independent central bank since 1996, a floating rand after 1998, inflation targeting since 2000, an inflation gap with the US that shrank from 10 points to under 1, reserves of about 74 billion dollars and no systemic financial event. Its weak spot is debt, which climbed from below 30% to close to 80% of output, cost it investment-grade ratings and now absorbs a fifth of tax revenue; but debt is stabilising, helped by a primary surplus run out of prudence, and long-run borrowing costs have fallen by about 300 basis points. Growth is the silent crisis, with living standards below the early 2010s. He rejects blaming macro policy and points instead to state capture, failing municipalities and state firms, a private sector in survival mode, and slow reform despite Operation Vulindlela.

4. The choice

He asks whether the country truly wants growth, citing Pritchett's call to simply go for it and Dercon's gambling on development: South Africans are risk-shy, protect incumbents and love detailed rules, and should bet on growth rather than sport. The country, he concludes, is resilient but not yet flourishing.

1. Hong Kong's progress and advantages

At a Hong Kong financial summit attended by Chief Executive John Lee, PBOC Governor Pan Gongsheng praised the city's momentum since early 2025: strong listings, dim sum bond issuance above 2 trillion yuan, and its status as the largest offshore yuan centre and largest cross-border wealth hub. He credits central government support and cites Hong Kong's open environment, capital markets, legal system and mainland links, plus China's stable macro policy, innovation focus and 15th Five-Year Plan, with growing global demand for the yuan in investment, financing and reserves. He noted accommodative monetary policy, proactive fiscal policy and a sound financial system on the mainland, and that Hong Kong will draft its first five-year development plan to fit the national strategy.

2. Connectivity and diversified markets

First, deepen connectivity: more listings and bonds, and wider stock, bond, wealth and swap Connect schemes; the Southbound Bond Connect annual quota rises from 500 to 800 billion yuan, its bonds become repo collateral, products widen to Hong Kong dollar and Macau bonds, and China's reserves will raise their Hong Kong allocations. Second, diversify beyond equities into bonds, gold, commodities and derivatives: with global rate and inflation swings rising, the stability of Chinese bonds offers diversification, and low yuan financing costs give Hong Kong a rare chance to draw sovereign and corporate issuers and become the region's leading financing hub. Five-year yuan government bond futures will launch soon, the Bond Connect company will upgrade into a trading-platform operator with CFETS, Northbound bonds will count as collateral at local clearing houses, and a gold vault and clearing link with the Shanghai Gold Exchange plus more yuan commodity products will follow.

3. The offshore yuan hub and stability

Third, strengthen the offshore yuan hub: the HKMA's business facility rises from 200 to 500 billion yuan with tenors up to three years, central banks get a yuan repo facility whose first operation was done with the HKMA, a Bank Indonesia-HKMA local-currency framework supports direct yuan-rupiah trade, fast-payment links expand to more institutions, scenarios and risk controls, and more central bank bills and offshore government bonds will deepen the asset pool; Hong Kong handles over 70% of cross-border yuan settlement. The finance ministry will also be backed in enlarging and diversifying its offshore government bond issues. Fourth, safeguard stability: Hong Kong came through the Asian crisis and the 2008 shock with central support, and, recalling Zhu Rongji's 1998 pledge, he said the central government will keep giving full support, given China's reserves, the world's largest. He invited global investors to join.

1. A higher risk picture: the Gulf, frontier AI and the energy wedge

Appearing before the House of Commons Treasury Committee on the Bank's twice-yearly stability assessments, Governor Andrew Bailey said risks have grown since January for two reasons. The Middle East conflict does not add to the structural weaknesses identified earlier, but it raises the chance that they materialise and the damage if they do. The second, newer factor is frontier AI and its consequences for cyber security, on which he had written to the committee. Asked about the on-off ceasefire, he said that a week earlier he would have said events were tracking the mildest of the three paths in the monetary policy report, while warning that the ceasefire was fragile; that instability has returned, so he cannot judge how long fighting will last. Energy prices are somewhat above pre-crisis levels, crude is well below its peak and pass-through to UK prices remains soft, but refined products have not fallen as far, because China has cut crude imports while also cutting exports of refined fuel, and Russian production capacity has been badly hit. From contacts with Gulf producers, oil output was resuming quickly until last week and new pipelines are being built around the Strait of Hormuz, while Qatar says about 83% of its gas supply is intact and the damaged remainder will take longer, with bigger expansion plans only by 2029-30. The chair noted that repairing regional infrastructure would take at least eight months once a ceasefire holds and asked what modelling the Bank is doing; Bailey replied that it talks constantly to industry and to Gulf counterparts, who say oil damage has been limited compared with the blockages. He added that a fresh inflation figure was due the following week and that evidence so far on pass-through of energy costs into UK prices is soft, but that the committee should not rely on crude prices alone, since petrol and diesel are what households actually pay for.

2. Politics, growth and the cost of a lost decade and a half

Asked whether a seventh prime minister in ten years harms financial stability, Bailey declined to comment on politics, saying that global conditions drive market moves far more than UK events, and that the UK is supported by monetary and financial stability and by its fiscal framework, which caused only a brief market wobble. His main advice for an incoming government is that growth is the central question: the core banking system is resilient and household and corporate debt is not stretched, but growth has been low for sixteen or seventeen years, a general rather than political story. In a naive counterfactual, if potential and actual growth had stayed at about 2.5% a year instead of about 1.5%, with the same fiscal policies and the same shocks from Covid, Brexit, Ukraine and the Gulf, public debt would be roughly ten percentage points of GDP lower, and the debate would be very different.

3. Regulation, growth and the lump of capital

Pressed on whether the push for deregulation to promote growth threatens stability, he said there will be no growth without financial stability, that not every rule is perfect and reviews are welcome, but that he differs from some arguments. He added that the Bank supports reviewing rules but that its own mandate gives it no reason to hold back growth. Banks now earn more than their cost of capital, with price-to-book ratios averaging about 1.7 against below 1 earlier, so they can choose to reinvest earnings to support lending, a choice markets should drive. He rejects the lump-of-capital view that a fixed pool of capital means looser rules let more be lent: a healthy bank earns returns it can reinvest. Randall Kroszner, speaking about the new Fed chair Kevin Warsh, said he is battle-tested on financial stability and the US Basel proposal is about effective rather than weaker regulation, which still lets banks intermediate. Asked whether history informs his thinking, Bailey said it does a lot: memories of the crisis are fading and people now say the response was too strong, but it did not feel excessive when the system had been left extremely fragile and had to be rebuilt, and relaxing standards because the danger has passed is not how it works.

4. Climate, AI infrastructure and clean power

On climate, Bailey said he was making a relative point earlier, not that the absolute risk has fallen; Europe's very hot weather is a reminder, and Nathanaël Benjamin added that the channels to banks, insurers and core markets remain present and are being embedded in mainstream stress testing, with resources allocated to relative risks, where AI has climbed the list quickly. On water and grid needs for data centres, the Bank is not the expert, but Benjamin noted that cooling needs are large and the question is whether water infrastructure can keep pace with market expectations. Bailey linked this to growth: technology is a long-run driver, the next cycle is likely to combine AI and robotics, and grid and data-centre capacity matters. He added that he had learned that AI needs clean power in the sense of very high-quality, continuous supply, which renewables alone do not currently give, so a baseload mix is needed.

5. The leverage ratio and the move from 14% to 13% capital

On the decision to loosen the leverage requirement by a fifth of a point, which looked like a split vote, Bailey explained that the change mostly cleans up an anomaly dating from 2019 that burdened the large domestic banks, which make most UK loans, and makes the leverage buffer as usable as the risk-weighted one; the two regimes run in parallel rather than add up. The complication is leverage in markets, such as hedge-fund and ETF leverage in equity and government debt markets, to which banks are linked as liquidity providers; the committee debated whether to tackle it through banking or market regulation, and Bailey prefers the market route, with further work before the changes are final. Stephen Blyth confirmed there was unanimity on fixing the discrepancy, with debate about a small reduction for other institutions, and said repo haircuts are the effective tool. Kroszner said a 20-basis-point change is not material and that a more releasable capital stack could let banks hold smaller management buffers, which also serves the secondary goal of credit and growth; he noted that most banks now pass stress tests, so the bar is not unattainable. Bailey added that the Bank will do further work before finalising the changes, to check whether they might increase market leverage.

6. Why banks say 13% is not 13%, and the US comparison

John Glen pressed that banks say their effective requirement is nearer 14.25% and claim a 190-basis-point premium over US rivals. Bailey denied the US has been bolder, since its latest package implements the Basel 3.1 rules the UK also follows, with international banks showing higher leverage ratios, and the euro area has done nothing bolder. He gave three reasons for the gap: banks keep voluntary management buffers; requirements differ by bank, with add-ons for weak risk management or concentrated risk; and many still think 13% is too high. Basel 3.1 will lower the bottom-up element that the PRA assesses, which is why the FPC matched it from the top down, and in other cases supervisors add capital when a bank cannot show it manages risk properly, which Bailey said is simply the Bank doing its job. He would like a single releasable buffer, which needs international agreement; excluding government bonds from the leverage ratio is not in the Basel rules. Kroszner said comparisons are more art than science and that US banks complain of gold-plating too, and Benjamin noted US banks hold large buffers without hurting profits. Blyth said academics, rating agencies and investors did not call for lower capital. Chris Coghlan recalled banks made the same pre-2008 argument.

7. Frontier AI and cyber risk

Bobby Dean asked what had been underestimated. Bailey said AI developers themselves are surprised: models are self-improving, an Anthropic model in April advanced faster than expected, and tests by the UK's AI Security Institute show leaps in speed and ability at real tasks. Frontier AI will strengthen both defence and offence: firms can use it to find and fix long-buried flaws, but attackers can do the same, so the race is for defence to be strengthened first, and that is getting harder. Models have a shelf life of two or three months, open-source versions are coming and China is only months behind. Benjamin said firms are testing models on their own systems, the risk is the speed at which weaknesses are found and the need for faster patching, which itself creates disruption risk, and defenders typically get access before attackers. Separately, banks' own AI use is a distinct risk: agentic trading is still more talk than reality, because agents can learn to cheat and lie and legal liability is unresolved. As principal-agent law makes principals liable for agents inside their remit and agents without legal personality cannot be liable, banks must think carefully before using them; the committee asked for a written note.

8. Critical third parties and an AI bubble

On critical third parties, Benjamin said four providers have been nominated, the PRA will supervise them and has specialist divisions, and the Bank sees no concern about their openness. On an AI bubble, Blyth said concentration and heightened valuations resemble the dot-com era, though strong earnings back them; the price assumes an optimistic earnings path, and power, cooling and planning are risks to it. Financial-stability worries are that AI expansion is increasingly funded by debt, with extreme growth in 2026, and that long-side leverage is growing through levered hedge funds using derivatives and prime brokerage and through levered ETFs, which could amplify a fall. On critical third parties, Dean asked about the regulator's capacity to look inside opaque providers, and Benjamin replied that the PRA has entire divisions of operational-resilience specialists. Bailey said a bubble bursting abroad would wash over the UK, and a Bank stress exercise showed lower UK growth, with some interest-rate adjustment. He added that general-purpose technologies take longer to show in productivity than expected, that everyone is priced to win but not everyone does, as Netscape showed, and that the UK has strengths in research and start-ups, with the persistent problem of scaling up. Blyth said the much-quoted estimate that about 650 billion dollars of yearly revenue is needed for a fair return is not physically impossible, though power, cooling and planning approval for data centres threaten the optimistic earnings story, and that the pace at which leverage and debt issuance are growing, including possible crowding out of other debt, is extraordinary.

9. Gilt repo, pensions and public debt

Yuan Yang asked about planned gilt repo reforms. Bailey said a discussion paper and a system-wide stress exercise suggested market regulation, such as clearing and haircuts, is better than classic institutional rules, responses were mixed, and proposals will follow; Benjamin said the update will come in the fourth-quarter report, as thinking rather than a final announcement, doing nothing is not an option, markets are much sturdier than before, yet that sturdiness must be built permanently into how they are organised, and the Bank works with the debt office, the FCA and the Treasury. Yang asked whether a gilt decision would be joint with the other agencies, and Benjamin said that depends on the measures, while Bailey hoped for consensus. Blyth explained the market's particular structure, in which hedge funds buy cash gilts against futures financed through repo, as in the US. Blyth, a former hedge-fund trader, admitted that firms prefer no haircut, supported a minimum haircut on gilt repo, said the cost argument is an effective lobbying line but should fall on leveraged returns, and that evidence does not show it would disrupt the market. Benjamin added the all-in cost must be assessed. Bailey explained the market's structural shift: maturing defined-benefit schemes are no longer natural buyers of long gilts, so the debt office shortened issuance, more demand comes from price-sensitive hedge funds, and the current account deficit increases reliance on overseas investors. Chair Meg Hillier asked how far a sudden equity correction could disrupt the gilt market; Bailey replied that the market had stayed resilient through this year's Gulf volatility, that earlier episodes needed intervention, and that the Bank now has many more tools and is ready to use them. Asked about debt near 100% of GDP, he stressed the fiscal framework, noted the favourable gilt response to the last Budget, and said the fiscal outlook faces three structural headwinds: ageing, the end of the post-Cold War defence dividend, and climate change.

10. Private credit, households, risk transfers and stablecoins

Kroszner and Benjamin said the Bank's system-wide exploratory exercise on private markets, with voluntary participation by all major players, produced a unique dataset on exposures, a first step toward answering the data gap; Blyth said recent bankruptcies like First Brands and Tricolor, which caused unexpected bank losses, re-raise whether linkages are understood, and that the exercise's value is in asking firms whether they are sure. Bailey, as chair of the Financial Stability Board, noted the FSB agenda has shifted to non-banks and that cross-border data sharing remains weak, and that the same big macro funds are leveraged across several government bond markets, so margin calls in one market, for example during last year's tariff volatility, can spill into gilts; with no stable initial margin, models make margining more pro-cyclical. Benjamin and Kroszner stressed that risks ultimately come back to bank balance sheets, because banks are the main providers of leverage to hedge funds and private markets. On households, mortgage rates are about 75 basis points higher since December, the sector is resilient with lower aggregate debt, but lower-income renters, whose median income is half that of mortgage holders, are most squeezed, though this does not threaten the banking system; the loan-to-income flexibility has worked as intended, with high-multiple lending around 13% against a 15% cap, about half to first-time buyers, and no rise in negative equity. Siobhain McDonagh asked whether the six lenders holding about 80% of mortgages squeeze smaller building societies; Benjamin said small firms have applied for the same flexibility and Bailey had heard no such complaint. On significant risk transfers, Bailey said they are not large but growing; lessons from the crisis show some turned out not to transfer risk, the PRA approves each one and has written to banks about unfunded deals, and stress tests assume failures. Benjamin said the differences from the 2008 collateralised debt obligations are that banks are stronger, loan underwriting is stricter and these deals are bilateral relationships rather than traded, though unfunded ones create counterparty risk. On stablecoins, the cap moved from a per-account limit to an aggregate 40 billion pound limit, the backing mix changed to 70% remunerated assets and 30% unremunerated central bank reserves, issuers get Bank accounts and a repo facility, and the UK is ahead of the US, whose CLARITY Act is stuck. Blyth added that the UK's shortage of short-dated gilts to back coins differs from the US and is being discussed with the debt office, and, in answer to John Glen's question about community banks losing deposits to crypto, Bailey said Basel's strict crypto rules limit banks' holdings, and some US crypto firms have obtained banking licences, which has not happened in the UK. Kroszner noted that the 30% direct access to the Bank lets it monitor outflows tick by tick and guarantees a cushion in a run. Bailey drew the line between stablecoins, which must meet the test of money, and crypto, which has no assured value; links between crypto and the core financial system are not deep. The chair closed by summarising a session on whether the capital rules strike the right balance, on the pace of AI-related risks and how hard it is for supervisors and companies to keep pace, and on whether heavy AI investment affects growth in other sectors.

1. Praise for Côte d'Ivoire and the national plan

Speaking in Abidjan as a group of advisers on raising money for Côte d'Ivoire's 2026-2030 national plan was launched, African Development Bank President Sidi Ould Tah thanked the host country for housing the bank and praised President Ouattara's transformation of the economy: average growth above 6% over a decade, controlled inflation, fiscal consolidation, a better business climate and major infrastructure. The 2021-2025 plan delivered gains in infrastructure, access to electricity and water, agriculture and inclusive growth despite shocks. The new plan has six pillars covering peace, agriculture, private investment, people and jobs, infrastructure and climate resilience, and governance, with priorities of industrialisation, jobs for young people and women, and a green transition.

2. The bank's commitment

Guided by its four cornerstones and the New African Financial Architecture, the bank pledged to help mobilise resources across public projects, private initiatives and public-private partnerships, using lending, guarantees, private capital instruments and technical support.

1. The Annual Economic Report

Presenting the BIS flagship report at the yearly shareholders' meeting of the BIS in Basel, its General Manager framed the past year as a mix of progress, from rapid advances in artificial intelligence, and peril, from renewed inflation, financial fragilities linked partly to AI enthusiasm and heavy public debt. A second chapter studies how high debt and changing bond markets complicate central banking, and a third, presented by a colleague, argues that new digital forms of money only work if built on proven institutional foundations. The common message is that each policy area gains room to act when the others are disciplined.

2. Why the world absorbed the tariffs

A year earlier, many expected US tariffs to hit growth and trade hard. Three things limited the damage. Effective US tariff rates ended close to 10% on average rather than the more than 25% announced, thanks to deals and exemptions, which explains about a third of the later upgrades to 2025 growth. Firms adapted by shipping early, rerouting goods and absorbing part of the cost in their margins. And enthusiasm for AI triggered a wave of spending on data centres and related equipment, lifting US investment and Asian exports and keeping financial conditions easy despite uncertainty. By the end of 2025, world growth was almost back to its pre-tariff forecast.

3. A historic oil shock

The year began strongly until the Middle East conflict. Shutting the Hormuz strait removed a larger share of world oil supply than the crises of the 1970s, and growth forecasts were cut across countries. Markets stayed calm, betting on a quick settlement, and signs of a lasting reopening brought relief. He warned against complacency: production halted across the region will take time to restart, damaged facilities and shipping routes need repair, and rebuilding depleted oil stocks could keep demand and prices high.

4. Four pressure points

The report identifies four sources of strain. First, inflation: global inflation has risen by about one point since the conflict began, and higher prices for inputs such as plastics and fertilisers can keep pushing consumer prices up after oil calms down, while recent memories of high inflation could unsettle expectations faster than before; more slack in labour markets and higher starting interest rates than in 2021 help. Second, AI: task-level studies show big efficiency gains but economy-wide effects are still small, and sectors more exposed to AI in the United States already show weaker job growth. If AI lifts productivity durably, the neutral interest rate rises; if automation squeezes wages and spending, a shortage of demand could reverse that, with matching consequences for inflation if policy misjudges it. Investment may also overshoot as firms race for market share, and past technology booms, from canals and railways to the dotcom era, often ended abruptly. Third, financial vulnerabilities: risk premiums are compressed, households hold more shares than in the past, AI firms and their suppliers increasingly borrow, some financing is circular and opaque, and private credit is growing, so a disappointment or a rate rise could tighten conditions sharply. Fourth, public finances: debt in many economies is near its highest since 1945, conflicts add spending demands, and interest costs and refinancing needs are rising.

5. Debt and new bond market players

Debt grew through repeated crises, but also because governments loosen policy strongly in bad times and tighten too little in good times, and since 2008 they have reacted even less to rising debt. Without consolidation, ageing, infrastructure and defence costs will push debt higher still, and it would be unwise to test the limits. Bond markets have also changed: pension funds and insurers remain steady buyers, but leveraged hedge funds financed by short-term repo, often with little or no margin, now play a much larger role in US and European government bonds. Liquidity that looks abundant can disappear under stress. The old link between weak sovereigns and weak banks has faded as banks are stronger, but turmoil can now spread more quickly via repo funding, from one country to another and from hedge funds to the banks tied to them. BIS estimates suggest that the chance of severe Treasury market stress is roughly ten times higher when debt is in its top tenth than in its bottom tenth, and also much higher when non-banks hold a large share of government bonds.

6. Three challenges for central banks

First, when investors reprice fiscal risk, bond yields jump and currencies fall; activity weakens, and prices first rise through expectations and import costs before falling later, a pattern long familiar in emerging markets that may spread to advanced ones. Second, calibrating policy gets harder: with high debt, rate rises hurt output more through debt costs, wider spreads, bondholder losses and forced deleveraging, but may cut inflation less because interest income supports spending and expectations react less; euro area evidence shows smaller price declines after tightening in high-debt countries. Third, market dysfunction can force central banks to intervene, yet repeated rescues encourage leverage, blur the policy stance, weaken fiscal discipline and raise doubts about independence.

7. What policymakers should do

Central banks should watch for second-round effects, keep expectations anchored and choose strategies that hold up across many AI scenarios, putting medium-term price stability first even when this burdens public finances, since credibility lowers long-term rates. Independence is vital but not sufficient. Governments should consolidate in good times within credible medium-term frameworks, protect growth-enhancing investment and pursue reforms that spread AI's gains. Regulators should apply equal rules to equal risks whatever the type of institution, curb leverage, liquidity mismatches and fragile funding, and keep up with AI and cyber risks. Liquidity backstops should be temporary, targeted and reversible, like the Bank of England's 2022 intervention; lending directly to non-banks could replace asset purchases if well regulated. Acting now costs less than acting later.

1. Six new measures

At the Lujiazui Forum in Shanghai, in front of Vice Premier He Lifeng and city leaders, the Governor of the People's Bank of China announced a package of measures. The bank will refine its short-term rate framework: the ad hoc overnight repo window will be set within a quarter point above or below the seven-day policy rate, narrowing the band from 70 to 50 points, and overnight reverse repos may be added to open market operations. A renminbi repo facility will let foreign central banks, international institutions and sovereign funds borrow yuan against high-quality bonds such as Chinese government debt. Six large banks will pilot offshore yuan-foreign exchange trading in the Shanghai free trade zone. The bank is studying an emergency liquidity backstop for non-bank financial firms, provided through swaps only in systemic market stress and conditioned on prudential rules and top-grade collateral to limit moral hazard. An action plan for offshore finance in Shanghai, a central repository of interbank trading and settlement data, an international e-CNY operations centre and a cross-border e-CNY transfer platform complete the list.

2. From banks to markets

China's financing has long relied on bank loans, but this is changing. In 2025, bonds and shares together provided 47% of new financing to the real economy against 45% for loans, the first time markets overtook credit. In the stock of financing, the bank share has fallen from almost all in the 1990s to about two-thirds. Over ten years, property and infrastructure have dropped from over 60% of new loans to about 10%, while five priority areas now take over 70%. Lending to small technology firms grows about 20% a year, technology bonds have reached about 2.6 trillion yuan, and the value of the innovation-focused boards rose nearly 50% in 2025.

3. Why the shift is lasting

Financing to the economy exceeds 450 trillion yuan and broad money 350 trillion, so further rapid expansion is neither easy nor needed. Loans to property and local government vehicles are shrinking, and using existing credit better matters as much as adding new credit; slower but better-allocated lending may become normal. Growth used to rest on property, infrastructure and heavy industry, which borrow long against solid collateral. New sectors in technology, advanced manufacturing and green industry invest in research and intangible assets, carry higher risk and need less bank debt, so start-ups depend on venture and private equity before turning to loans, bonds and shares. China therefore needs diverse markets alongside better-targeted bank credit.

4. Markets built over three decades

China now has a full range of markets, from shares and bonds to gold, commodities and derivatives. Listed companies have grown from eight in Shanghai in the early 1990s to 5 500 worth over 110 trillion yuan, and bonds outstanding from under 500 billion in 1997 to more than 200 trillion, both second worldwide. Currency trading covers over 40 currencies and more than $42 trillion a year. Access schemes and connections with Hong Kong have brought foreign holdings of onshore yuan assets above 10 trillion, and Chinese securities are in major global indices.

5. Five priorities

During the 15th Five-Year Plan, the bank will widen the range of markets and products, including technology boards, long-term investment, asset management and green bonds; deepen market pricing, the government bond yield curve and careful development of rate and currency derivatives; strengthen the legal framework, default resolution and the integrity of underwriters, raters, auditors and lawyers; enlarge macroprudential tools for currency, stock and bond markets to contain contagion; and open further, improving connection schemes, panda bonds, cross-border payments and offshore yuan supply, while supporting Hong Kong as the offshore yuan hub and preventing systemic risk.

1. Simplifying reporting

Speaking at the asset managers' association meeting in Brussels, ESMA Chair Verena Ross set four priorities: simpler reporting, digital innovation, market resilience and retail participation. On reporting, ESMA's May reports found more than 100 European and national obligations on funds and managers, so it proposes a common single template in a modular system, with managers reporting once and authorities, including the ECB and central banks, sharing and reusing the data through a central hub while national authorities still collect it. Implementation starts with AIFMD and UCITS reporting, with draft technical standards consulted by year-end and finalised in the first half of 2027. For transaction reporting, ESMA has short-term relief ideas such as revising two-sided reporting duties and an end-state integrated model across EMIR, MiFIR and SFTR, being tested through cost-benefit analysis, with attention to timelines to avoid repeated system rebuilds.

2. Tokenisation of funds

Tokenisation is often better seen as a shift in the plumbing surrounding funds than a break with the fund model; it may automate functions, speed subscriptions and redemptions, improve registers and cut reconciliations, and give investors accessibility and longer trading hours. Tokenised Treasury and money-market products total several billion dollars, small but growing. ESMA takes an evidence-based view: key questions are whether the ledger is the official register, whether transfers are final on-chain, and whether investors hold units directly, and it is working with national authorities on real cases and possible regulatory barriers. Investors must understand their rights and risks, including cyber and operational dependencies, and legal certainty and interoperability are needed so that national differences in registers, title, custody, settlement finality and insolvency do not recreate fragmentation.

3. Market resilience and vulnerabilities

The Middle East war added to tensions, bringing signs of stagflation, higher bond yields and tighter conditions, with corporate credit risk and debt sustainability concerns re-emerging. Markets and infrastructure proved resilient, including orderly clearing of energy contracts despite sharp margin calls, but valuations in some segments are stretched and markets seem optimistic about the war's duration, while performance is concentrated in technology. In an AI-driven correction, EU equity funds would be hit hard because 45% of their assets are in US equities, and tech is a third of the S&P 500 against 18% of the Euro Stoxx 50. Other watch points: hedge-fund leverage and its role in government bond turmoil, fund liquidity tools now reported systematically, and private credit of about 0.1 trillion euros, opaque, illiquid and increasingly connected to banks and insurers.

4. Retail investors

The savings and investments union puts ordinary investors at the centre, but the investor journey feels burdensome, information is complex, costs unclear and trust uneven. The Retail Investment Strategy should refocus rules on outcomes: valuable products, clear disclosures and advice aligned with investors' interests. ESMA will balance simplification with safeguards, especially disclosures and suitability, adapting information to digital channels; for the PRIIPs key document it expects changes to a product-at-a-glance section and performance, replacing scenarios with past performance for funds, and simpler cost calculations, with consumer testing. Rules alone are not enough: trust, fair costs and financial literacy matter, and success is measured by whether markets work for the people they serve.

1. Riga and the Baltic lesson

Opening the EBRD's 2026 annual meeting at the Dailes Theatre in Riga, its President praised Latvia, Estonia and Lithuania as standout examples of the move to market economies and EU membership, with lively start-ups and heavy use of digital finance. Long dependent on Russian gas and power, the three states joined the EU electricity grid after the invasion of Ukraine and invested in renewables, turning a weakness into resilience.

2. A turbulent world

A new shock that began in energy now disrupts trade, lifts commodity prices, threatens food supply, pushes up inflation and interest rates and shrinks fiscal room, on top of the arrival of artificial intelligence. She described the world as moving from volatile to turbulent and set out three challenges for the bank.

3. Responding to conflict

Multilateral lenders step up when others retreat. In Iraq, Jordan, Lebanon, the West Bank and Gaza and nearby economies, the bank will provide liquidity to private and state firms, stabilise finance and prepare recovery. Ukraine remains central: the EBRD is its largest institutional investor, with €10 billion invested since 2022, close to 50 000 firms supported and over 22 million people reached through energy and infrastructure projects, and it intends to lead reconstruction.

4. Defending cooperation

On her seventh wartime visit to Ukraine she saw the Chornobyl shelter, built through the largest joint nuclear safety effort the bank ever led, which now needs repairs after a Russian drone strike. With aid falling and sovereign debt rising, partnering with private investors matters more; the bank's first large risk transfer lets pension funds and insurers share its exposures, and revised procurement rules address concerns over supply chains, cyber risk and fair competition.

5. Keeping the long view

Turbulence also brings openings: the Middle Corridor linking Asia and Europe through Central Asia and the Caucasus, supply diversification that helps countries climb value chains, and abundant sun and wind. The five-year plan approved in London now guides green investment, human capital and gender equality, private capital mobilisation and digitalisation. The bank has begun investing in Iraq and in five African members, from Senegal and Côte d'Ivoire to Nigeria, Benin and Kenya, while the bank watches its budget and efficiency.

1. A meeting of academies in Sinaia

Opening a seminar in Sinaia with the Spanish royal academy for economic and financial science and Romania's Academy, National Bank of Romania Governor Mugur Isărescu welcomed guests, paid tribute to former Prime Minister Petre Roman and the improvised decisions of the early-1990s transition, and noted that the central bank has hosted an international financial stability seminar there for almost twenty years. He described long ties with the Spanish academy, recalled earlier joint sessions and his own talks on Romania's role in the EU and on monetary policy in an emerging economy, and said economics, law and sociology are anthropological disciplines that gain meaning through dialogue.

2. Money without cash

Reflecting on a career that began with handwritten ledgers and administered exchange rates, he said cash was once the only money citizens knew, whereas today people pay, send money abroad or borrow without touching banknotes, through bank cards, the internet, mobile payments and now central bank digital currencies. With the ECB and others debating a digital currency, he wondered whether central banks are agile enough to manage the shift without losing stability, trust and protection of citizens; he has no firm answers and values dialogue between solid institutions. He ended with Sinaia's history and a football anecdote, giving guests a commemorative coin on Steaua Bucharest's 1986 European Cup win over Barcelona.

1. Economy under strain

After the euro-area finance ministers met in Cyprus, Kyriakos Pierrakakis describes a demanding moment. Instability in the Middle East pressures energy markets and supply chains, and the Hormuz situation disrupts oil, gas, fertiliser and helium. The Commission now projects growth slightly under one percent this year and about 1.2% in 2027, weaker than before yet far from recession, with renewed but milder inflation pressure than in 2022.

2. Policy balance

Europe must protect fiscal stability while easing strain on households and firms, using measures that are temporary, targeted and tailored. He credits past energy adaptation with cutting the crisis impact by about 12% according to the IMF, and stresses coordination with partners after G7 talks led by France.

3. Housing and the digital euro

Ministers held a substantive talk on housing affordability, which affects productivity, mobility and inequality, agreeing no single fix suits all countries. They also met a European Parliament committee chair on digital euro legislation, which he wants finished by year end, calling the project vital for sovereignty and the euro's international role, deliverable by 2029.

1. Uncertainty as the new normal

At a Bangkok conference on Asia in 2050, Georgieva said the new Middle East conflict, whose regional and global effects the IMF is quantifying, puts energy security and confidence at stake for most of Asia. Uncertainty is now the permanent condition rather than a passing phase, so governments and firms need strategy, financial strength and above all agility, and should concentrate on what lies within their own control.

2. A golden quarter-century

Since 2000 the region built policy frameworks, financial oversight, reserves and trust, which brought stability, low inflation, investment, private-sector growth and poverty reduction on a vast scale. Asia now produces two-thirds of global growth and nearly forty percent of world trade.

3. First challenge: productivity through AI

AI could add up to eight tenths of a point to annual growth in Asia, provided large public and private investment in digital infrastructure and skills, fewer regulatory barriers, deeper stock and bond markets and sensible guardrails. Singapore tops the IMF's preparedness index, China and Korea lead in adoption, India is democratising access and Japan uses robotics; several Southeast Asian economies and Korea have out-of-court debt restructuring.

4. Second challenge: people

AI will not help everyone: middle and entry-level jobs are most at risk, which matters for young people, so workers must be taught to keep learning. Asia will age faster than any region, with the number aged over sixty-five doubling by 2050, yet conditions differ: Japan is old, China and Korea are ageing quickly, India, Bangladesh and parts of Southeast Asia stay young, so some need higher participation and others more jobs.

5. Third challenge: trade and integration

Openness can be a weakness, but trade finds a way around barriers, and Asia can act alone through regional integration: lowering nontariff barriers could raise regional output by about 1.8 percent in the long run. She urged an ambition beyond trade agreements, towards an internal market like the European one, helped by Asia's lead in digital payments, which will feature at the Annual Meetings.