loan to were calibrated with a 2013 would have not transparency exercise ) reduce uk mortgage ’ observed in other value ( based on eba flat correlation factor of indexed loan to value european countries for benchmarking exercise 20 % and not 15 % ( i. e. if house price had their national in 2018 ) mortgages in that year stayed constant since 2013 ) source : eba transparency exercise 2016, eba benchmarking exercise 2018 ( article 78 of the crd ), and bank of england ’ s calcula tions. chart 8 : capital held against a recent margin loan exposure shows wide dispersion across firms source : bank of england note : box and whisker plot of margin loan rwa data. whiskers denote 0 % ( the minimum ) and 100 % ( maximum ) value. edges of box d enote 25th percentile ( rwas 11 % of exposure ) and 75th percentile ( rwas 91 % of exposure ). horizontal line denotes 50th percentile ( rwas 26 % of exposure ) all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx chart 9 : leverage ratios in 2018 could be lower if we measured activity such as collateral swaps differently impact of measuring activity differently on aggregate leverage ratio of sample banks 6 % 5 % 5. 34 % 0. 53 % 0. 68 % 0. 11 % 4 % 4. 02 % 3 % 2 % 1 % 0 % current leverage ratio ( reported ) collateral swaps netted repo synthetic pb leverage ratio ( incl. all potential'missing'leverage ) impact using worst case assumptions source : bank of england note : banks in sample include large uk banks and large overseas investment firms all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx

2 of the discussion paper. the evidence for this is discussed in more detail in section 2 of the discussion paper. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice chart 6 : shadow carbon price in scenarios shown in chart 2 source : iiasa [ ngfs climate scenarios database, using marker models ] the question is not whether the shadow carbon price has to rise – the question is when. to the extent that markets are assuming an unrealistically low or distant pickup – and it seems increasingly clear that they are – financial assets today may be mispriced. an ‘ adjusted market neutrality ’ principle that took this mispricing into account could suggest a very different asset allocation in investment portfolios, including the cbps. until recently, the bank of england lacked the mandate to make such adjustments. in march, however, the chancellor updated the mpc ’ s ‘ remit letter ’ to confirm that the economic strategy of the government – which the mpc is required to support as a ‘ secondary objective ’ – includes supporting the transition to a net zero emissions economy. 15 portfolio decarbonisation is not enough : look forward, work together to drive change now comes the tricky bit : translating these conceptual insights into practice. at first sight it might seem the answer is simple : just sell all our high - emission bonds, and use the proceeds to buy low - emission ones. the carbon footprint of the cbps would fall sharply. and, to the extent the bank ’ s actions were influential, the financing costs of high - emissions firms should rise, sending a powerful wakeup call. but indiscriminate ‘ portfolio decarbonisation ’ of this kind cannot be the best strategy for investors like the bank seeking to incentivise economy - wide transition to net zero, for two key reasons : mpc remit statement and letter and fpc remit letter | bank of england all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice first, the high - emissions firms whose bonds we would be selling are the ones we most need to be at the vanguard of emissions reduction. but selling their bonds doesn ’ t destroy them as assets, it simply transfers them to other investors. and if investors seeking to incentivise transition are all decarbonising, those left holding the bonds are by definition