klaas knot : can intensive regulation and msme financing coincide? speech by mr klaas knot, president of the netherlands bank, at the conference on “ the future of banking ”, organized by the financierings - maatschappij voor ontwikkelingslanden n. v. ( fmo ), amsterdam, 12 november 2012. * * * your royal highness, ladies and gentlemen, i ’ m very pleased to be here today to speak on this important topic : the future of banking. today, we will exchange views on the changing banking sector and the role of regulation in that sector. and i will share some thoughts on how we can make the banking sector in this part of the world healthy again. the key question i will seek to answer is : “ can intensive regulation and micro -, small -, and medium - sized enterprise ( msme ) financing coincide? ” but before answering that question, let me first sketch how this intensive regulation came about. over the past few decades, banking in most developed economies has become increasingly complex, interwoven, innovative and international. furthermore, the focus of many western banks has gradually shifted away from what their core task should have been : namely, to service the real economy and its customers. instead, these banks increasingly engaged in the lucrative business of making money with money. this change of policy created unnecessary risks for their entire portfolio. risks that couldn ’ t be mitigated by the existing regulations. and we all know what problems arose as a result. one of the answers to those problems was more and intensified regulation. higher capital requirements, minimum liquidity requirements, extra buffers are but a few examples of the measures standard - setting bodies developed. most of these measures are currently being drafted in national legislation in many countries around the world. will intensifying regulation help solve some of the problems in the developed banking sector? yes, i believe so. for, indeed, there was a shortage of capital and liquidity in the banking sector. and the leverage was generally way too high, not just for large, international banks. increasing capital buffers ; establishing resolution regimes ; reducing systemic relevance of banks, are some of the important recent initiatives designed to make banks healthier. thanks to these measures, banks will be better positioned to absorb losses and become less dependent on government support. and thanks to these measures, trust in the financial sector will eventually be restored. i therefore wholeheartedly support these

bank. so, like the private sector, we are developing new tools and methodologies to support us in this goal. and guess what! we are not the only central bank or supervisor exploring this new type of risk. central banks and supervisors worldwide are studying these issues. of course, there are trailblazers : you ’ re probably all aware of the bank of england ’ s pioneering work in this area. and this morning you discussed the eu taxonomy, which would take probably some time to enter into force. this is completely understandable for such a complex task. in this regard it is worthwhile to look at the chinese approach for laying the foundation for green finance. they managed to develop a green taxonomy in just over two months! a remarkably short period of time. these are a couple of examples of countries that are ahead of the curve. at the other end of the spectrum are central banks, for which these issues are completely new to the agenda. background and membership of ngfs these developments laid the foundation for setting up the network of central bank and supervisors at the end of last year, the ngfs. ( you remember, the network for greening the financial system … ). it brings together institutions that are determined to move forward on green finance and climate - related risks. within the network we share experiences and best practices. this means we don ’ t all have to reinvent the wheel and are able to join forces. since its launch in december 2017, the ngfs has experienced a rapid growth in terms of new members and observers. there were eight founding countries to begin with. but as chair i am proud to say we now have seventeen members and five observers. hopefully, there are many more to come. and our members come from across the globe. it is not just a european party. no. all continents are represented. china, singapore and mexico were three of the founding members, as well as for example france and the uk. this summer, the ecb, including the ssm, the single supervisory mechanism, came on board. i expect this to have a major effect within europe. the ssm directly supervises all one hundred and nineteen significant banks in the euro area and also indirectly supervises the less significant banks in this area. that means all countries in the banking union are indirectly linked to the ngfs. members demonstrate a strong collective commitment to the greening of the financial system. they are taking up their responsibility to contribute to the implementation of the paris agreement.