a shift between sectors. a large part of the adjustment will occur within the sectors. how well enterprises within the same sector cope with the new framework will vary. in order to assess the risks posed by the transformation, banks and supervisors therefore need to take a more granular view. this applies, for example, to the impact of climate risks. a loan to a glass manufacturer, for example, entails different climate risks depending on whether the glass is melted using electricity from renewable sources or using natural gas. standardised disclosure requirements are therefore important to ensure that credit risk can be robustly assessed and appropriate risk provisions can be made. climate stress tests show how severely banks would be affected by the effects of climate change. in a recent climate risk stress test, we modelled how an increase in carbon prices to up to us ( united states ) $ 345 would affect individual banks ’ financial metrics. different scenarios are assumed : in one scenario, prices rise incrementally, not suddenly, meaning that banks ’ portfolios are not revalued overnight. [ 20 ] the second scenario simulates a sudden, but moderate increase in the price of carbon to €200 per tonne. what we are looking at is therefore transition risks as the economy moves to carbon neutrality, not physical risks. the results show that credit risk in carbon - intensive sectors can cause banks to suffer losses. [ 21 ] however, these losses appear to be manageable across the banking sector as a whole. in essence, these results therefore corroborate earlier bundesbank climate risk analyses. [ 22 ] one reason for this is that loans to sectors that are particularly exposed to climate risk account for around 9 % of corporate loans overall. individual institutions, by contrast, may be hard hit. susanne korbmacher and alexander schulz will present the results of this climate risk stress test this afternoon. at the same time, we asked banks how they measure and assess sustainability risks. [ 23 ] around two - thirds of the institutions are only just starting to implement supervisory recommendations on sustainability risks. only a small percentage, mostly larger institutions, carry out internal stress tests and scenario analyses. to date, the results feed into strategic considerations or risk management to only a limited degree. institutions should therefore have methods and processes in place to identify sustainability risks and to be able to incorporate them into risk management. 3 we need a public discourse on the role of banks in the transformation process and what is expected of supervision and regulation.

proposal's length and complexity and are certainly a positive step. while it would be impossible to highlight all the issues in the proposal that 4 / 12 bis - central bankers'speeches raise concerns in my remarks today, i will note several areas that will be necessary to address : redundancy in the capital framework. the proposal does not include an analysis of the appropriate aggregate level of capital requirements. this consideration is important since many of the existing enhanced capital standards that apply for u. s. banks were contemplated and finalized while the prudential regulation framework, including capital and liquidity rules, were still under development. for example, there are known overlaps and redundancies among the new market risk and operational risk requirements, and the stress capital buffer. calibration of the market risk capital rule. the revisions to the market risk rule alone will increase risk - weighted assets from $ 430 billion to $ 760 billion for category i and ii firms, and from $ 130 billion to $ 220 billion for category iii and iv firms. 3 these increases are significant, with broad - based impacts, affecting business and municipal financing, risk management, hedging of foreign exchange and interest rate risk, or managing the risks of fluctuating commodity prices through hedging activities. inefficiency of two standardized capital stacks. firms subject to the new riskbased capital rule would remain subject to the standardized approach applicable to all firms, resulting in a " dual - stack " capital calculation, with the firm required to use the lower capital ratio. this approach will add complexity to the capital calculation for all firms, but it will be especially cumbersome for category iii and iv firms, applying a one - size - fits - all approach for these smaller firms despite the variation in their risk, size, business models, and complexity, likely resulting in costs that outweigh the benefits of this provision. 4 punitive treatment of fee income. the proposal adopts a punitive treatment for noninterest and fee - based income through the proposed operational risk requirements, coupled with an internal loss multiplier. imposing this type of capital charge for operational risk can deter banks from diversifying revenue streams, even though this can enhance an institution's stability and resilience. missed opportunity to review leverage ratio requirements. the proposal does not address or propose changes to leverage requirements, including the 5 percent leverage ratio that applies to u. s. global systemically important banks, commonly referred to as the enhanced supplementary