nout wellink : lessons to be learned from the crisis introduction by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at the press conference on the bank ’ s annual report 2009, amsterdam, 25 march 2010. * * * a few words by way of introduction. we are facing extraordinary challenges and painful adjustments. moreover, many lessons can be drawn from the crisis : by bank managements, regulators, supervisors, but also by customers of financial institutions. by pursuing an extremely expansionary monetary and fiscal policy, monetary authorities and governments have prevented the world economy from moving into a downward spiral. but the remedy also carries risks. to ward off a future wave of inflation, central banks need to return to more normal monetary conditions. furthermore, in a great many countries, the huge budget deficits run up must be resolutely scaled back to avoid generating such a strong upward pressure on inflation rates as to stunt economic recovery. decisive and rapid scalingback of budget deficits is also essential to avert an explosion in governments ’ debt positions. monetary authorities worldwide have taken the first steps towards normalising monetary conditions. so has the ecb. the restoration of confidence is key to economic recovery. a government that convincingly tackles its budgetary problems is an overriding factor in rebuilding confidence. a recent dnb survey shows that dutch citizens acknowledge this necessity. the european agreement to narrow the deficit back to below 3 % of gdp by 2013 enjoys broad support. but that alone is not enough. in addition, the netherlands should at least aim to bring the budget close to balance by the end of the new cabinet period. also, the rules under the stability and growth pact must be tightened. the experiences with the greek fiscal deficit have made this painfully clear. the badly - hit financial sector faces a fundamental adjustment over the next few years. it is in everyone ’ s interest that the sector emerges stronger from this process. the timing and method of the government ’ s retreat from the banking and insurance world is crucial. but it is equally important that the sector regains the confidence of society. adjustments in the pension system are needed too. the more difficult it becomes to increase contributions, the more uncertain the pension results and the greater the incentive to lower the pension target. raising the retirement age would significantly advance the sustainability of the system. the delay arisen is therefore regrettable. financial stability hinges on international agreements and coordination. major progress has been realised both globally and

of the financial system. the fourth pillar is about society having to become more effective in pursuing the real criminals. for this we need to take a much broader view, we need to invest in law enforcement, we need to look at our tax laws, we need to become more effective in combatting crime. so to summarize these four pillars i would say we need rigorous compliance with existing regulation. secondly we need smarter and more sophisticated ways of cooperation between financial institutions and between them and public authorities in the field of cdd and transaction monitoring. we need a european supervisory mechanism to guarantee an effective and consistent regulatory framework. and finally we need more comprehensive public sector action, including devoting sufficient resources to prosecution, to ensure there is less dirty money sloshing through the system to start with. climate related risks let us now turn to our next challenge. i don ’ t need to tell you how our climate is changing. you can now see the impact of higher temperatures and severe weather events everywhere you look in the world. i could spend the rest of the day reciting extremely chilling examples of our ever hotter world. i will skip that. you know these examples by now. but what i would like to talk about today is how the changing climate presents substantial financial risks to the financial sector. we can divide these risks into two main channels : physical risks and transition risks. the increasing severity and frequency of climate change - related events such as flooding, droughts and storms, present physical risks that have a direct impact on the financial sector when they materialize. and then there are the transition risks. these stem from new laws and policies, technological advances or changes in public sentiment that come with the transition to a lower - carbon economy. these factors can leave carbon intensive assets vulnerable to value reassessments by financial markets. this can happen very abruptly, or could even render these assets ‘ stranded ’. financial institutions with balance sheet exposures to the fossil fuel and utility sectors could particularly be affected. fout! onbekende naam voor documenteigenschap. that climate - related risks translate into financial risks via the physical and transition channels ( and thus fall squarely within the existing mandates of central banks and supervisors ) is now widely understood and accepted by an ever growing number of central banks and supervisors around the world. as chairman of the ngfs, the central banks and supervisors network for greening the financial system, i ’ d like to tell you about our work. in