" central banks, economic stability and social capital : what ’ s the connection? " - remarks by governor gabriel makhlouf at the london school of economics 16 february 2023 speech good evening. it is a pleasure to be here today to talk about central banks and social capital. my thanks to niamh for the invitation, and i look forward to the discussion with david and alan, and, of course, yourselves the audience. in economics, the concept of capital is embedded in our production function view of what drives economic growth. for adam smith, capital referred to the physical assets and machines of production. financial capital was also important, allowing rms to buy more physical assets. financial capital also had a risk mitigation or loss absorption role, as any nancial regulator knows all too well. as our ability to measure economic growth improved, and it became clear that growth in output far exceeded growth in labour and ( physical ) capital, human capital – the growth and transfer of knowledge in society – came to be seen as an additional important factor of production. increasing interest in ecological and climate - related issues during the 1970s saw the emergence of another, natural capital. natural capital includes aspects of the natural environment ( such as minerals, energy resources, land, soil, water, trees, plants and wildlife ), as well as broader ecosystems ( such as forests, soil, aquatic environments and the atmosphere ). 1 given the urgency of the climate - related challenges we face, natural capital is increasingly centre stage for public policy, including for central banks. as the ecb ’ s 2021 monetary policy strategy review sets out, climate change and policies to reduce emissions have an impact on in ation and growth – in other words they are part of our knitting - so we need to account for these risks in our policy choices. 2 but it is not just central banks. recent moves by the us government to include natural capital in national economic statistics is an important step that will help inform current policy choices that impact future climate - related outcomes. 3 i cannot over emphasise the importance of measurement to informing policy analysis. but i am here today to talk about another kind of capital : social capital, which i tend to think of as “ the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society. ” 4 in the past, i have referred to all the capitals collectively as our economic capital. the potential for social capital to promote collaboration and coordination

##rs resolution service ( abhaile ), the personal insolvency regime, and a court mentor service. collectively, these protections have kept the vast majority of distressed borrowers in their homes, despite the scale of mortgage arrears experienced following the financial crisis. at the end of 2018, less than one in sixteen mortgages relating to private dwelling homes are in arrears over 90 days. in 2018 there were over twenty two thousand ( 22, 171 ) new restructure arrangements for mortgages relating to private dwelling homes. this brings the total number of private dwelling homes loans categorised as restructured to over 1 / 3 bis central bankers'speeches one hundred and ten thousand ( 111, 504 ) as at the end of 2018. in addition, over three thousand distressed borrowers have secured personal insolvency arrangements, which return borrowers to solvency, while keeping them in their home in over 95 % of cases. the enactment of this bill will not offer new or existing borrowers any additional regulatory consumer protection and it could have negative consequences for the functioning of the mortgage market, with wider implications for all mortgage borrowers. functioning of the mortgage market the enactment of the bill in its current form would hamper the ability of banks to access marketbased sources of financing using mortgages as collateral, such as securitisations and covered bonds. access to such forms of finance helps diversify the funding base and achieve lower funding costs relative to issuing unsecured bonds. constraints on the ability to mobilise mortgages as collateral to raise funding through these market - based channels could ultimately limit the availability, or increase the cost, of mortgage credit. at a time when the severe dysfunction in the irish mortgage market is finally easing, this bill could, unintentionally, slow or even reverse that progress. it would certainly give further pause for thought for any firm considering entering the irish market by increasing the cost of doing business in ireland and effectively limiting the funding available for mortgage lending. we do not believe this in the interests of current and future mortgage borrowers. financial stability during the financial crisis, the ability of irish banks to post securitisations and covered bonds as collateral was crucial to allow them to borrow from the eurosystem to meet their acute liquidity needs. total monetary policy lending provided to irish - domiciled banks rose to a high of €140 billion towards the end of 2010, of which approximately 40 % was collateral