contribute to sustainability and environmental objectives. this should facilitate the development of standards and labels for green financial products such as green bonds. for our part, the ecb is carefully studying the potential impact of climate - related risks for the euro area financial system. we are currently developing an analytical framework for carrying out a climate risk stress test analysis for the euro area banking sector. the pilot test framework will be macroprudential in nature, and allow us to analyse the system - wide materiality of transition risks for banks ’ solvency, along with their lending capacity and the implications for the overall economy. the eventual aim is to incorporate both physical and transitional risks, and investigate how these two types of risks interact with each other. this type of analysis still faces some major barriers. there is no consistent classification of firms ’ activities and the data on banks ’ exposures is not granular enough. we expect this to improve, however, since banks clearly need to treat risks from climate change in the same fashion as other financial risks. these stress tests analyses will be challenging to design and implement, but may greatly increase our knowledge about the financial impact of climate risks, environmental policy tradeoffs and overall economic resilience. the financial system ’ s role in facilitating the transition these are areas that are obviously important for the ecb, given our concern for the stability of 2 / 4 bis central bankers'speeches the euro area financial system. yet i would like to take a broader perspective for the remainder of my remarks today. climate - related risks also represent a significant threat to prosperity in the economy more widely. governments must shoulder the greater part of the burden of driving the transition. 7 effective carbon taxes and cap and trade schemes, such as the eu emissions trading scheme, force companies and consumers to pay a more representative cost for their activities, and incentivise them to find the most efficient way to reduce emissions. beyond carbon emissions, global solutions are needed to ensure polluting activity cannot arbitrage between jurisdictions. nonetheless, i believe that the financial sector can play a vital role in enhancing overall welfare, by helping to smooth the transition in two important ways. the first way is by enabling risk - sharing notably through insurance. indeed, a high degree of insurance coverage can mitigate the negative economic impact of disasters. 8 second, the financial sector can help smooth the transition by funding new technologies. reaching the paris agreement goals in full and on schedule requires carbon - efficient technologies that are yet to be invented, and

no means new phenomena, the speed of their transmission has accelerated tremendously over the past few decades. the unfolding of the sovereign debt crises in the 1980 ’ s occurred over the course of years, the asian financial crisis developed, at its peak, over months. and last intensification of the present crisis, starting in september 2008, has spread around the globe in the course of half - days. many factors have contributed to this acceleration, including the process of global financial integration, the increasing leverage in institutions, the technological advancements that allow for an instantaneous transmission of information world - wide and the accumulation over a long period of time of unsustainable global imbalances. hence, a key message for all crisis management frameworks is that they need to be able to cope with the speed of which financial developments can unfold. the role of infrastructures policy action should not concern only banks but also the system as a whole, in particular addressing market functioning, including those of cds. the current reflections at international level include also initiatives aimed at strengthening the core financial infrastructures and markets. indeed, it is essential that conditions are in place to ensure that the financial system is able to withstand any possible shock and that financial infrastructures are strengthened to reduce the risk of contagion. moreover, regulators have to ensure that financial market participants are behaving in full compliance with the rules and that no additional source of risks would derive from improper behaviour. in this context, attention has been attracted at the current juncture by the credit default swaps ( cds ) market. i would like to highlight the importance that certain financial instruments, which were introduced in consideration of their positive effects for the hedging of risks, should not be misused in a speculative manner. i share the consensus at global level that regulators should be equipped with appropriate tools to be able to investigate and act in an effective and coordinated manner. we need more transparency in cds markets, and so do investors. transparency of markets is a public good. authorities must be able to gather information, to assess possible risks for financial stability and detect possible improper conduct. in this respect, a key priority in terms of enhancing the resilience of the cds markets is the establishment of central counterparty facilities. such ccps will help, in particular, to diversify and share risk exposures and their margining procedures will reduce the incentive to take excessive risks. moreover, ccps will deliver more of the much needed transparency for all parties