A current subject of horizontal analysis is leveraged loans – specifically, whether lax underwriting practices for such loans could pose a significant risk to financial stability. In addition, we have reorganized the supervision group at the New York Fed in a number of ways that promote unbiased analysis and professional objectivity. Many of these changes directly reflect the recommendations in a 2009 report that I commissioned from David Beim, which was featured in the recent This American Life program about supervision at the New York Fed. For example: •  Over the last five years, we have reassigned some of our most senior personnel to front-line positions at the largest supervised institutions. We also recruited experienced executives with financial backgrounds from outside the New York Fed. The purpose of these personnel changes was to position leaders with the confidence and depth of professional experience necessary to challenge the leadership of supervised financial institutions. •  We increased training, especially for more senior examiners. Since 2011, we have required enhanced training for senior supervisory officers on corporate governance, business strategies, and risks. Our goal is to deliver stronger and clearer  4  BIS central bankers’ speeches  supervisory views to boards of directors and senior management. Also since that year, we have offered a customized management development program for managers in the supervision group. •  We hired more risk specialists and created the role of business-line specialist to assess the risks and vulnerabilities in firms’ business models.

This means two things: improving the resilience of the financial system to climate-related and environmental risks; and encouraging the scaling up of the financing flows needed to support the transition towards a sustainable economy. To give substance to its Glasgow Declaration, the NGFS has just announced its new work programme. It comprises six key initiatives: enhancing supervisory practices with respect to managing climate risks; designing actionable climate scenarios; assessing the implications of climate change for monetary policy; providing guidance for central banks on their own net-zero transition; analysing nature-related financial risks; and building capacity among its membership. Let me start with SUPERVISION. The NGFS will take to the next stage its ongoing work to incorporate environmental risks within supervisory frameworks and practices. One of the new areas of focus will be financial institutions’ transition plans to manage environmental risks. To be credible and impactful, financial institutions’ transition plans must be based on how they will facilitate the transition of their clients and customers towards greater sustainability. This will in turn depend on the respective industry transition pathways relevant to their clients and customers. The NGFS will examine the role of supervisors in assessing financial institutions’ transition plans. We will study potential ways to assess transition plans’ resilience to environmental risks. We will identify good practices among supervisors on overseeing financial institutions’ transition plans, along with the necessary data needs. We will examine how financial institutions should consider their counterparties’ transition plans with respect to exposure analysis, transition risk management processes, and their own transition plans.