ECB’s Coeuré to Head BIS Innovation Hub

BenoÎt CoeurÉ, whose eight-year term on the European Central Bank executive board expires December 31, will move to the Bank for International Settlements as head of the BIS Innovation Hub, which was formed earlier this year to encourage collaboration on financial technology among the world's central banks.

The board of the BIS in Basel, Switzerland, announced the appointment on November 11 and said CoeurÉ will start a five-year term in his new role on January 15.

A former French Treasury official, CoeurÉ has been on the ECB executive board since January 2012 and chaired BIS's standard-setting Committee on Payments and Market Infrastructures since September 2013. His ECB position had him in charge of international and European relations, market operations, market infrastructure and payments, and oversight of payment systems.

Amid the rise of cryptocurrencies and associated systemic concerns, CoeurÉ served as chair of a Group of Seven working group on global stablecoins, which produced a report in October with initial governance and regulatory recommendations, and as co-chair of a related Financial Stability Board working group.

CoeurÉ has discussed publicly the potential opportunities and implications of digital currencies, notably saying, in a September speech in Luxembourg, that private digital money “will likely change the international monetary and financial system in one way or another, either directly or by driving global central banks to innovate.”

Stability and Inclusion Objectives

“I look forward to bringing my expertise to the global central banking community at this time of rapid technological change,” CoeurÉ said in a statement. “We must make the best use of innovation to support financial stability and promote financial inclusion.”

BIS general manager AgustÍn Carstens said he is “delighted to have BenoÎt on board to advance the important mission of the hub, which is to harness innovation to improve the functioning of the international financial system. Technology-driven innovation is driving change in many fields and can bring great benefits for anyone who makes and receives payments. The hub reflects central banks' commitment to share resources and lay the foundations for a bright future.”

Approved by the BIS board in June, the hub has a mandate “to identify, and develop in-depth insights into, critical trends in technology affecting central banking; develop public goods in the technology space geared towards improving the functioning of the global financial system; and serve as a focal point for a network of central bank experts on innovation,” according to the BIS website.

Some BIS-member central banks have joined other supervisory agencies in the Global Financial Innovation Network, which seeks to foster collaboration and cooperation on fintech, regtech and other aspects of innovation in the financial services industry and in its oversight.

In its initial phase, BIS Innovation Hub centers have been established in Switzerland, Hong Kong and, as of November 13, Singapore, in collaboration, respectively, with the Swiss National Bank, Hong Kong Monetary Authority and Monetary Authority of Singapore. Other locations are expected to follow in a second phase of implementation.

Global stablecoins, central bank digital currencies, payment innovations, the impact of “big tech” on financial intermediation and digitalization of trade finance are among work-agenda items under consideration for the hub initiative.

Can New Currencies Compete?

In his Luxembourg speech, at a conference on the Future of the International Monetary System, CoeurÉ addressed “the question of whether the arrival of private digital forms of money could challenge the pecking order of the current system more easily - whether there is something special about these 'currencies' that could allow them to compete more effectively with the U.S. dollar, assuming of course that they passed the high bar set by global regulators.

“The short answer, in my view, is yes - for two main reasons”: the potential for rapid adoption in a globalized market seeing “consumer demand for payment services that work across borders and that are also faster, cheaper and easier to use”; and that international currency usage could be driven by adding a “payment leg” to a non-financial service, such as the WhatsApp messaging platform.

CoeurÉ concluded that stablecoin offerings such as Facebook's Libra “will prove disruptive in one way or another. They are the natural result of rapid technological progress, globalization and shifting consumer preferences. But how we respond to these challenges is up to us.

“We can focus our efforts on ensuring that private payment systems will thrive in a space that respects our common global policy priorities. Or we can accelerate our own efforts to overcome the remaining weaknesses in global payment systems, safe in the belief that only public money can ultimately, and collectively, ensure a safe store of value, a credible unit of account and a stable means of payment. Or we can do both of these things, and create an environment in which market-based and public payment systems effectively complement each other, jointly shaping the payments universe in the 21st century.”

BIS Roles for Powell, Others

Central bank governors announced other appointments relating to BIS functions:

- Federal Reserve Board chair Jerome Powell as chair of the Global Economy Meeting and Economic Consultative Committee, two of the principal bimonthly meetings held at the BIS. Powell's appointment takes effect February 1 for a three-year term, succeeding Bank of England governor Mark Carney.

- Federal Reserve Bank of New York president and CEO John Williams as chair of the BIS Consultative Council for the Americas, an advisory committee to the BIS board. In a two-year term starting January 9, Williams replaces Julio Velarde, governor of the Central Reserve Bank of Peru.

- John Cunliffe, deputy governor of the Bank of England, as chair of the Committee on Payments and Market Infrastructures, succeeding BenoÎt CoeurÉ, for a three-year term starting January 1.

Separately, the Group of Governors and Heads of Supervision (GHOS), the Basel Committee on Banking Supervision governing body, selected Bank of France governor FranÇois Villeroy de Galhau as its chair for a three-year term, effective immediately. He succeeds Mario Draghi, president of the European Central Bank until October 31, who had chaired the GHOS since July 2013.

The BIS Board elected new ECB president Christine Lagarde as a member, replacing Draghi.