of looming risks and lingering fragilities that may affect price stability and the safety and soundness of banks in the future. this is ingrained in our family dna for all our tasks and responsibilities. such caution is particularly called for in today's macro - financial environment, which has been very much in flux in recent years amid changes in the economic outlook, geopolitical shocks, and challenges related to global heating, nature degradation and digitalisation. we expect this period of elevated uncertainty to continue, bringing challenges for both banking supervision and monetary policy. indeed, the risks and trends identified in our monetary policy strategy and our supervisory priorities for the years ahead are very similar. common challenges ahead so what will these challenges in the macro - financial environment imply for our tasks? first, our objectives will become even more important. price stability and sound banks provide an anchor that makes an economy – and therefore a society – more resilient to shocks. the more frequent and intensive the shocks, the more vital a secure anchor. for it is in choppy, not calm, waters when a ship truly benefits from its anchor. at the same time, the types of shock hitting the economy and the financial system will become more complex to assess. but an accurate assessment is crucial to gauging the potential risk to price stability or to the soundness of banks, as well as the appropriate policy response. 3 / 5 bis - central bankers'speeches take the example of the ongoing and worsening climate and nature crises. we know that manifestations of physical risk – like floods, fires, droughts and extreme weather events – are on the rise. governments are acting to support the green transition, while pursuing climate adaptation measures is becoming ever more important. a relevant question is whether climate and nature shocks can be fully captured by the traditional categorisation of demand, supply and financial shocks used in most macroeconomic models. in that vein, my fellow ecb executive board member isabel schnabel has suggested thinking about the impact of climate change on inflation in terms of " climateflation ", " fossilflation " and " greenflation ". 1 even if such concepts can be mapped analytically into the more traditional type of shocks, we need to learn more about the exact mechanisms before being able to draw the appropriate conclusions for monetary policy. something similar applies on the banking supervision side. the basel committee on banking supervision has established that climate - related risks translate into the traditional types of risk that banks consider

##2, covering credit risk, liquidity risk, market risk and operational risk, including litigation risk. 3 however, here too, the exact mechanisms of mapping actual hazards to risks needs to be analysed further to fully capture climate and nature - related factors in quantifiable regulatory and supervisory requirements. these are vitally important questions as global heating, nature degradation and transition and adaptation policies have a profound impact on the economy and the financial system. as supervisory board chair claudia buch underlined in her opening address, research has an important role to play in supporting monetary policy and supervision in respect of these and other major challenges like the impact of geopolitical risks and the digital transition. 4 some of these themes will feature at this conference tomorrow. and on the monetary policy side, we recently established a new research network known as challenges for monetary policy transmission in a changing world ( champ ). the champ network seeks to revisit our knowledge of monetary transmission channels in the context of unprecedented shocks and structural changes. 5 through conferences such as this one, initiatives like the champ network, and many other interactions with the research community, we seek your inspiration, ideas and insights to address the challenges facing monetary policy and banking supervision in the future. conclusion let me wrap up. ten years ago, we at the ecb saw our family grow with the establishment of the ssm. ten years on, european banking supervision has made great strides in making banks more robust and resilient. this has helped strengthen the european economy in general while also enhancing the effectiveness of monetary policy. 4 / 5 bis - central bankers'speeches in the next ten years, the two strands of our family will continue to pursue their respective objectives, no matter what challenges may emerge. they will do so under one roof, in line with the separation principle and united in their commitment. thank you for your attention. 1 schnabel. i. ( 2022 ), " a new age of energy inflation : climateflation, fossilflation and greenflation ", speech at a panel on " monetary policy and climate change " at the ecb and its watchers xxii conference, 17 march. 2 basel committee on banking supervision ( 2021 ), climate - related risk drivers and their transmission channels, bis, april. 3 on litigation risk, see elderson, f. ( 2023 ), " " come hell or high water " : addressing the risks of climate and environment - related litigation for the banking sector