. these go beyond basel ii and what its architects had in mind for it. but they nonetheless require us to think in terms of the same combination of evolving best practice within the financial services industry on the one hand and public policy needs on the other. i the challenges of an increasingly integrated financial sector firstly, the new accord is mainly designed for credit risks and hence essentially for banks. yet we are all becoming clearer that the process of intermediation of risks is itself changing mightily. the silos that were securities, lending, and insurance, are no longer silos. instead we are seeing the increasing development of a single financial network embracing not only these areas, but also many organisations which fall outside today's definitions of what is a bank, what is a securities house, or what is an insurance company. this process has gathered pace in recent years, and has accelerated since the basel ii process itself began. a couple of examples can illustrate what i mean. first is the growth of the credit risk transfer market. alan greenspan has recently noted that this may have benign effects, recently arguing that :'if risk is properly dispersed, shocks to the overall economic system will be better absorbed and less likely to create cascading failures that could threaten financial stability '. but new forms of contract tend to bring uncertainty. the recent litigation in new york involving claims under surety bonds is perhaps a much reported incident of this sort. and uncertainties in a world dependent on expeditious performance of contracts has to be a real issue in financial stability terms. second, we have seen the emergence of large multifunctional financial groups. so my observation is that whatever thinking might have gone into the basel ii accord for banks, we would be wise to focus further, on the way in which capital adequacy and other prudential supervisory techniques fit together, for different parts of the financial world, including insurance. the wisdom in earlier days was that systemic risk, in a financial stability sense, was largely confined to banks. not any more. it has been recognised for some time that the securities arena and the process of securitisation has changed all that. and more recently, growing interlinkages with the insurance sector are giving rise to the need for a further rethink. ii looking beyond capital adequacy : the importance of liquidity secondly a rather different angle. viewed from the point of view of financial stability, capital adequacy is clearly a vital and

insights on concentration risks into a practical instrument are on - going. one option that is being looked into is a quantitative concentration limit, either absolute or relative. this limit would then be subject to supervisory reporting, disclosure or an additional capital buffer. and in case of a breach of the limit, a range of supervisory measures could be considered, such as a mandatory notification in accordance with the large exposures framework or a deduction of the excess part of the concentrated position from the bank's capital. if this concentration limit were to become part of the prudential framework, it could well be phased in to give you, banks, time to make the necessary adjustments. i do want to stress, though, that our ideas on concentration limits are very much in the proposal phase. de nederlandsche bank is looking forward to comments on this proposal and to the results of any consultation rounds on the eba discussion paper. these could in turn help us to improve the proposal. so far, i have discussed climate and environmental changes as a source of prudential risks. however, some banks also consider these changes, and the related changing stakeholder preferences, as an opportunity to change their strategy and business model. for example, i find it promising to see that a number of banks are committing, 4 / 6 bis - central bankers'speeches themselves, to net - zero initiatives. such as the banks that choose to align with the paris agreement by signing the commitment statement of the net - zero banking alliance. institutions that have signed this statement have 18 months to do a number of things. they need to identify operational and attributable green house gas emissions from their lending and investment portfolios. and then they need to set specific targets, for both 2030 and 2050, so that they can align with the trajectories towards net - zero in 2050 or earlier. to achieve these targets, banks might need to adjust their business model and their range of products and services. or they may need to adjust their decision - making process and thus adapt their governance structure and risk management procedures. it is important that banks provide qualitative and quantitative disclosures to support their commitments. as mentioned earlier, the recent ecb assessment shows that banks do not fully meet ecb expectations on disclosure of c & e risks. and this is where the final risks i want to mention today, occur. reputational and litigation risks. these risks follow from an increased stakeholder awareness for a netzero society