Central bank innovation - from Switzerland to the world
Speech by Mr Agustín Carstens, General Manager of the BIS, at the Founding Ceremony, Swiss Centre BIS Innovation Hub, Zurich, 8 October 2019.
Guete Abig mitenand.1
It is a great pleasure to be here with you this evening. Many thanks to Thomas Jordan and to the staff of the SNB for all of their efforts to date to join us in building a solid foundation for the BIS Innovation Hub Swiss Centre and for organising this ceremony.
The establishment of the BIS Innovation Hub is a key part of our BIS 2025 strategy. In our previous medium term-plan, the emphasis was mainly on addressing the challenges associated with the aftermath of the Great Financial Crisis. In this post-crisis environment, amid rapid economic and technological change, the needs of central banks and other financial authorities have evolved. So that we can continuously deliver the services expected of us, it is imperative that we align ourselves with the changing needs of our stakeholders in order to fulfil our mission - to provide the highest-quality, most cutting-edge knowledge and services to central banks, as well as to promote cooperation and collaboration for the common aim of a smoothly functioning global financial system.
Technological change is a critical driver behind the design of our strategy, as it is disrupting financial services and changing the way economies work across the globe. You can see that backdrop reflected in the initiatives we have pertaining to economic research, advanced analytics, external collaboration, banking activities, and the delivery of our own internal services.
And it is with this in mind that the Board approved the creation of the BIS Innovation Hub as part of our BIS 2025 strategy at our Annual General Meeting this past June. The Hub's mission is to foster international collaboration on innovative financial technology within the central banking community. The strategy reflects our commitment to continuous innovation and to preparing ourselves for the challenges of tomorrow.
In that context, the Hub's mandate will be threefold:
- to identify and develop in-depth insights into critical trends in financial technology of relevance to central banks;
- to develop public goods in the technology space geared towards improving the functioning of the global financial system; and
- to serve as a focal point for a network of central bank experts on innovation.
Our reasoning is that technology-driven innovation is advancing at an accelerating pace in many fields, and especially in financial services. This has consequences both for the financial system and for the way central banks operate. We are setting up the Hub in multiple locations because the IT revolution knows no borders. Initially, we will build on the innovation efforts of central banks that have made significant breakthroughs in this space. In doing so, we will catalyse collaborative efforts among central banks, and cooperate, when appropriate, with academia, financial services providers and the broader private sector to develop public goods for the benefit of the global financial system. As the Hub gathers experience, a home-grown agenda will quickly be developed.
Innovation made in Switzerland
In this context, we are very proud to be establishing one of the first three Hub Centres here in Switzerland, hosted by the SNB, alongside those in Hong Kong SAR and Singapore. This decision by the BIS Board is a sign of confidence and trust in the partnership of the BIS and the SNB to develop advances that can be of benefit to our global community.
Of course, the BIS has a very long-standing commitment to Switzerland. As you may know, the BIS is the world's oldest international financial institution and remains the principal centre for international central bank cooperation. Basel has been home to the BIS for all of its nearly 90 years of existence.
Yet the establishment of one of the Hub Centres in Switzerland reflects more than this. In the last few decades, Switzerland has emerged as a hotbed of innovation - and it is not hard to understand why. The country is regularly listed among the top five economies in the world in terms of competitiveness.2 It has a vibrant fintech ecosystem with hundreds of start-ups, supported by amendments to the Swiss legal framework that facilitate the use of new technologies in the financial sector. It has strong academic institutions that specialise in technology and rank among the top universities worldwide. Finally, cyber security and considerations of data privacy are long-standing priorities of Swiss policy, going well beyond financial matters.
In the digital sphere, an impressive number of inventions have come from Switzerland. The first liquid crystal display, or LCD, was developed in Basel. The first commercial computer mouse was developed in Morges. Perhaps most significantly of all, the World Wide Web was launched at CERN in Geneva - initially as a platform for automated information-sharing between scientists in universities and institutes around the world. The SNB too has long been a source of innovation, as evidenced by its launch of one of the first real-time gross settlement systems. It is hard to imagine a recipe for the digital innovations of today without some Swiss ingredients.
A strong foundation for the future
Today, the Swiss authorities - SNB, FINMA, SIF and others - are continuing to take a proactive, supportive approach to innovation. FINMA has been a pioneer in the regulatory response to cryptoassets. The Federal Council's decision to establish fintech licenses, and the SNB's definition of access criteria to Swiss Interbank Clearing for these entities, are important steps. Meanwhile, the Swiss banks are offering innovative products, new start-ups are active in regtech and wealth management, the ETH is making strides in big data analytics, and SIX is doing important work on distributed ledger technology, just to name a few examples.
This work will provide useful input into the Hub's current and future projects and topics, which will evolve over time based on relevance to the responsibilities of central banks and on potential for international scalability. In the initial phase, as I said, we are building on and scaling up projects that are already quite advanced in the host central banks, so that we can have a running start.
As a result, and given the accomplishments of the Swiss authorities, the Swiss Centre will look at (i) asset tokenisation and (ii) the monitoring of fast-paced markets - a very appropriate set of issues given what is happening in the global financial system. Thomas will give further insights on this shortly.
In the Hong Kong Centre, initial efforts will focus on (i) the development of trade finance platforms using distributed ledger technology and (ii) the implications of big tech for the financial system. In Singapore, the initial projects will be on (i) regtech and suptech practices and (ii) developing foundational public digital infrastructures (the so-called global stack) based on digital identities for the provision of financial services.
At the same time, we are looking ahead to developing a home-grown agenda for the Innovation Hub, building on the respective strengths in our regional Centres. Our pursuit of these public goods is only one part of the Hub's threefold mandate. As mentioned before, the other two corners of the triangle are the identification of critical trends and creating a network for central bank experts. But the provision of these public goods are essential in ensuring that we are participating in innovation and developing applications that can be used in real life.
In operating the Hub Centre, we will engage with a wide community of stakeholders from the financial, technology and academic sectors. We hope to benefit from the deep expertise here in the room, and in all of your institutions, and from the economies of scale available in a unique location like Switzerland.
I look forward to partnering with the SNB on the Hub Centre in Switzerland, and to working with all of you going forward.
