Budapest, May 27, 2022 - The A conference titled ‘Financial Stability: New Challenges and Focuses’ was organised by the Magyar Nemzeti Bank (MNB) and the Official Monetary Financial Institutions Forum (OMFIF). The event was attended by many experts from four continents. The discussions focused on recent challenges to the financial system, including risks posed by COVID-19 or the Russia-Ukraine crisis, and on issues related to the future of the financial system, such as climate risk management or digitalisation, affecting financial intermediation in various ways.
During the two-day conference co-organised by the MNB and OMFIF, 29 speakers from four continents discussed in a hybrid form current issues affecting the financial system, the short-term challenges of financial stability and its longer-term future.
In his opening remarks, MNB Deputy Governor Barnabás Virág emphasised the importance of similar knowledge-sharing events. He added that the recent shocks to the financial system and further turbulence expected in the 2020s will reinforce the relevance of international professional consultations of this kind.
David Marsh, Chairman of OMFIF, highlighted that in the face of the financial and geopolitical challenges facing the global economy we are all “unconventional” today, re-learning Sándor Lámfalussy's contribution to economic policy knowledge in a similarly turbulent period decades ago. In line with the broad theme of the conference, he emphasised that one of the most important tasks of central bank experts today is to recognise the limitations of their knowledge and to learn how to perform their ever-expanding responsibilities.
In his keynote speech, Tobias Adrian, Director of the IMF's Monetary and Capital Markets Department, presented a novel approach to financial cycles that will allow regulators to respond faster to financial turbulence and gain a better picture of the sometimes rapidly recovering risks to the financial system.
In the first panel, participants discussed the potential effects of the Russia-Ukraine crisis, focusing on the Central and Eastern European region. The speakers argued that the crisis experience of recent months shows that financial stability is not currently in immediate jeopardy, but geopolitical risks need to be given greater importance in the long run, in the midst of extraordinary crisis events. They also pointed out that, in the face of increasingly pressing economic policy problems, financial stability tasks should not lose their priority either.
While analysing the financial stability implications of the COVID pandemic, the experts highlighted that the framework set up after the 2008 crisis has done well overall, but some areas for improvement could be identified in the current severe shock situation. The discussion revealed that countries are using the macroprudential framework in increasingly active and creative ways, and the experience gained in the crisis can further improve its effectiveness.
In the panel on central bank digital currency (CBDC), participants discussed a number of outstanding issues related to the design of CBDCs. These need to be addressed in order to achieve a competitive and inclusive CBDC that guarantees the security of both users and the financial infrastructure and supports technological innovation.
The last section of the first day guided the audience to the world of stress testing, focusing not only on banks, but also on other participants of the financial system. During the discussion, the latest macroprudential stress testing methods as well as the European Central Bank's comprehensive stress testing efforts involving the entire financial system were reviewed.
On the second day of the event, the focus of presentations and panel discussions was on the fine-tuning of climate risk scenarios and the problem of the lack of detailed data needed for analysis. The latter requires active steps on the part of the financial sector, governments and central banks to improve data availability.
Participants in the next panel discussed the latest challenges of the prudential framework affecting the financial system, where the question arose as to what extent regulation that has become increasingly complex in recent years serves to maintain financial stability. The experts discussed the potential issues stemming from analytical methods that also employ more advanced artificial intelligence, mainly used to assess credit risk, in evaluating the riskiness of market participants and in making related supervisory regulatory decisions.
The final panel of the event focused on the issues of business models and market structures evolving due to digitalisation. Participants pointed out that, in the longer term, new digital entrants (FinTech and BigTech companies) could expand their market presence in close cooperation with “traditional” financial institutions, but this could raise issues in a number of areas such as competition, credit risk management and data security. The experts agreed that data will play a key role in the financial system of the future and that both financial institutions and authorities need to be prepared for the associated risks.
More information about the speakers at the “Financial Stability Conference: New Challenges and Focuses” is available on the event's website, and the presentations and panel discussions can be viewed on the MNB's official YouTube channel:
First day: https://www.youtube.com/watch?v=vhYBWBLtpJs
Second day: https://www.youtube.com/watch?v=IQxLKoWPh8I