following in the footsteps of other european countries that have activated or increased the countercyclical capital buffer. bafin followed this recommendation and raised the buffer to 0. 25 % of risk - weighted domestic exposures in the third quarter of 2019. banks have 12 months to build up the buffer, and, for the most part, they may use their surplus capital to meet the requirement. the recommendation makes allowances for uncertainty about economic developments. future adjustments to the countercyclical capital buffer will depend on whether and to what extent cyclical risks continue to build up in the financial system. the financial cycle, and not the economic cycle, is the relevant factor here. 5 need for action to ensure a stable financial system digitalisation, climate change, demographic change, and globalisation are megatrends that are impacting all areas of the economy and society. the financial sector mirrors these developments and, at the same time, is a key catalyst for the necessary structural change. for the first time, this year ’ s financial stability review features a chapter on the impact of climate - related risks on the financial system. in this context, our goal is not to evaluate climate - policy decisions. instead, we aim to analyse the impact of climate change as well as the political, social and economic responses. to this end, more than 45 central banks and supervisors worldwide have joined forces in the network for greening the financial system ( ngfs ), pooling their methodological capabilities and building up a robust information base. at the international level, the financial stability board ’ s ( fsb ) task force on climaterelated financial disclosures undertook important preliminary work for co2 risks to be better disclosed in enterprises ’ balance sheets. in order to tackle climate change effectively, it is necessary to implement a policy regime that adjusts the relative prices between carbon - intensive and low - carbon economic activities. this, in turn, necessitates significant structural change. a functioning financial system is key to ensuring that structural change can succeed without hampering innovation or jeopardising stability. however, structural change has also not stopped short of the financial sector itself. banks – just like firms in other economic sectors – must therefore be allowed to withdraw from the market or to shrink if their business strategies are no longer sustainable. an effective resolution and restructuring regime can help market mechanisms to function properly. with the banking package recently passed by the eu, key regulations on creditors participating in losses – known as a bail -

, the same happened with net purchases under the older monetary policy asset purchase programme ( app ). in june, the governing council of the ecb raised its key interest rates by 50 basis points, thus closing the chapter on negative interest rates. that was followed by two 3 / 7 bis - central bankers'speeches interest rate steps of 75 basis points each and another two of 50 basis points each. this meant that, within the space of not even eight months, key interest rates had been raised by 300 basis points. and the ecb governing council has signalled an increase by a further 50 basis points for march. in addition, there were a number of other modifications to the monetary policy framework, one of which i would like to mention here : the creation of the transmission protection instrument, or tpi for short. it can be activated to counter disorderly and unwarranted market dynamics that pose a threat to the achievement of price stability. the tpi is designed to ensure that the monetary policy stance is transmitted smoothly across all euro area countries. or, in technical terms : " to ensure the singleness of the governing council's monetary policy ". activation of the tpi is based on a comprehensive assessment by the ecb governing council. it has not had to be activated thus far, and i hope it stays that way. at our latest meeting, we also decided on the starting point for reducing holdings under the app : from march to june 2023, €15 billion per month on average of principal payments from maturing securities will no longer be reinvested. that corresponds to around half of the redemptions over that period of time. this likewise represents an important contribution to the normalisation of monetary policy. in the past few years, the eurosystem expanded its balance sheet enormously for monetary policy reasons. the large volume of central bank asset holdings is having a dampening effect, particularly at the longer end of the yield curve. at the short end, however, the eurosystem has been pushing up the yield curve with substantial policy rate steps. in the long run, something has to give. moreover, there is no reason for supplying the financial system over the long term with such ample liquidity as is being provided now. i am therefore in favour of taking a steeper path of reduction starting in july in light of experience gained up to that point. i expect the markets to cope well with the reduction in the eurosystem's asset holdings. and, given