Moreover, it was plausibly the case that pre-crisis liquidity may have been too plentiful and too cheap in some financial markets, so some correction in the quantity and pricing of liquidity was to be expected, and indeed was potentially desirable, from a welfare perspective. Research at the Bank of England has sought to identify the impact of leverage ratio requirements on the functioning of UK government bond (‘gilt’) and gilt repo markets, using transaction-level data (Bicu et al (forthcoming)).18 It does find some causal impact of the leverage requirement on various metrics of liquidity, a worsening that is particularly acute at quarter-ends. Significantly, the banks most constrained by the leverage ratio reduced their activity in financial markets most. At the same time, however, dealers unaffected by the leverage ratio requirement also reduced their liquidity provision and, if anything, by more. This suggests factors other than the leverage ratio may have been at work in curtailing liquidity in these markets. It also leaves open the question of whether the correction in liquidity, even if privately costly, came at any social cost. Baranova, Liu and Shakir (2017) assess the costs that could arise from regulation which affects market liquidity at different levels of stress. They find higher costs in benign conditions, but substantial benefits in situations of stress as dealers make markets for longer. Overall Implications for Optimal Capital  How do these research findings tilt the optimal bank capital calculus relative to the LEI study? Table 1 summarises the evidence. They are a mixed bag.

Benoît Cœuré: Monetary policy and climate change Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at a conference on "Scaling up Green Finance: The Role of Central Banks", organised by the Network for Greening the Financial System, the Deutsche Bundesbank and the Council on Economic Policies, Berlin, 8 November 2018. * * * 2018 has seen one of the hottest summers in Europe since weather records began.1 I would like to thank Torsti Silvonen, Fabio Tamburrini and Sam Langfield for their contributions to this speech. I remain solely responsible for the opinions contained herein. Increasing weather extremes, rising sea levels and Arctic melting are now clearly visible consequences of human-induced warming.2 Climate change is not a theory. It is a fact. While only one dimension of the human cost, the consequences in macroeconomic terms look set to be large. Without further mitigation, cumulative emissions pose significant risks of economic disruption.3 While there is a wide recognition that environmental externalities should be primarily corrected by first-best policies, such as taxes4 , all authorities, including the ECB, need to reflect on, and consider, the appropriate response to climate change. In recent years, central bankers, led by Bank of England Governor Mark Carney, have started discussing the financial stability implications of climate change.5 The first tangible results are trickling in. The Financial Stability Board’s Task Force on Climate-related Financial Disclosures published its first status report just a few weeks ago.