industry? the national supervisory authorities will remain the direct interface for financial firms on micro - as well as macro - prudential issues. as mentioned in the eu regulation, the esrb ’ s warnings and recommendations will be directed – i quote from the regulation – “ to the union as a whole, or to one or more member states, or to one or more of the esas or to one or more national supervisory authorities ”. recommendations can be also directed to the european commission, in the area of the elaboration of new eu legislation. nowhere do the legal texts mention that the esrb will address individual firms in its warnings and recommendations. but the industry also has to be aware that with the esrb and the overall european system of financial supervision we will be in a different environment. following deliberations by the esrb, competent authorities may decide to utilise the tools that are designed to counter the build - up of risk in the financial system. their tools, as you know, include possible capital addons, countercyclical capital buffers or maximum loan to value ratios. one of the first tasks of the esrb could be to review existing instruments and those that are being created at the global and the european levels. more generally, micro - prudential instruments that are well known in the banking sector, would be calibrated and used with a macro - prudential orientation. i want to refer here to the concrete example of counter - cyclical capital buffers. in july, the basel committee on banking supervision released its proposal for countercyclical capital buffers. the aim of such buffers is to make banks build up capital when system - wide risk is increasing following excessive credit growth. the buffers can then be drawn on when risks materialise and credit losses occur. the case of counter - cyclical buffers is particularly interesting, first because it is one of the tools with a clear macro - prudential orientation and second, because the esrb and the european banking authority ( eba ) could join forces for implementing the framework in europe. this is suggested by the european commission in its recent consultation paper on the potential role of the esrb and the eba in defining policies and standards that national authorities should follow. concluding remarks let me conclude. i see three reasons to expect relevant changes with the start of macroprudential oversight in europe. the first and most important reason is that better supervision should contribute to a more stable financial system

marja nykanen : problems in embedding climate risks into the traditional financial risk framework speech by ms marja nykanen, deputy governor of the bank of finland, at the bank of finland and the finnish ministry of finance conference " greener finance for sustainable future ", helsinki, 31 october 2019. * * * ladies and gentlemen, welcome to the second day of the conference. i am glad to see such a broad spectrum of expertise here. i am marja nykanen, deputy governor of the bank of finland. in recent years, the bank of finland has become active in climate - related issues. for example, we participate in the work of the network for greening the financial system ’ s work streams and plenary. the intergovernmental panel on climate change ( ipcc ) publishes reports on scenarios that will happen if we fail to lower our emissions. from the most recent special report, we learned that the arctic and polar areas will experience considerable transformations as glaciers melt at an increasingly faster rate. the melting creates a massive amount of meltwater, which will have significant impact on rising sea levels. but the report shows that polar areas also face other consequences. let ’ s take, for example, the arctic ocean. it provides a habitat for many species. by 2100, it will freeze later in the year with thinner ice and leave those species without a sufficient habitat. also by 2100, up to 80 % of scandinavian and central european mountain glaciers might have vanished. for me, such future prospects are unsettling. even though the scenarios seem worrying, it is not too late to act. we, as finance professionals, play an important role in this fight against climate change. as we heard yesterday, a significant amount of investment is required to transform our economies into sustainable ones. to facilitate investment, we need a well - functioning financial market with availability of green funding instruments. and, in order to ensure a well - functioning financial system, we must keep an eye on the system - level climate risks that might threaten the stable functioning of the financial system and smooth flows of funding for sustainable investments. in the discussion of climate change risks to the financial sector, two types of systemic risks have been identified. firstly, there are physical risks, namely damage caused by extreme weather events or climate - related natural disasters. these include hurricanes, floods, storms, heat waves etc. in addition to potential risks to life, such events generate great financial damage. for example, such