pillar 2 requirements. secondly, the nature of climate - related risks calls for central banks and regulators to collaborate at the national level to support alignment of financial industry responses with national climate strategies and priorities. as i mentioned at the start of my remarks, central banks and financial regulators provide an important bridge between the financial sector and the government to inform national policies, targets and strategies on the one hand, and financial sector responses to climate risk on the other hand. in malaysia, jc3 serves as a focal point for engagements with the malaysian climate change action council ( mycac ) 1 on national climate policies. third, effective coordination with the industry serves to maximise transition benefits and minimise downside risks. for developing and emerging economies in particular, an inclusive strategy is key to avoid macroeconomic and social dislocations as we transition to a low - carbon economy. as financial and economic advisors to the government, we are working with the government to develop sustainable finance roadmaps that will mitigate risks of stranded assets if disorderly transition occurs. the bank ’ s principles - based taxonomy was developed with this in mind. the taxonomy aims to facilitate the direction of financial flows to activities that support the transition to a low - carbon and climate resilient economy. it supports businesses in transition by recognising climate risk mitigation and adaptation efforts over time, while preserving the rigour of assessments by avoiding greenwashing. the taxonomy also encourages financial institutions to nurture and nudge businesses to 2 / 3 bis central bankers'speeches transition to greener practices. it helps improve development outcomes, and builds capacity within businesses themselves to better manage climate - related risks. to further support transition activities, the bank has also established funds to assist smes in pivoting their businesses to be more sustainable in the post - pandemic world. this includes transitioning to greener activities. the bank is looking to further expand these facilities with a greater focus on green activities that are aligned with the taxonomy going forward. the bank also sees great value in pursuing a coordinated and regionally coherent financial sector response to the climate challenge. within asean, the bank is working closely with central banks in the region through the asean taxonomy board in the construction of a regional taxonomy that can provide a common language for sustainable finance in asean and promote efficiency. this will encourage the alignment of national taxonomies, building on common principles and a tiering system to cater to differences in financial systems, economic and social structures, and

, the new recovery and resolution tools, provided that they are credible, will reduce the implicit government guarantee and distortive risk - taking incentives created by bail - out expectations and artificially low funding costs. structural reform while the improved capital and liquidity requirements and the new resolution regime take us a long way in addressing the too - big - to - fail problem, they do not take us all the way. in october 2012 the high - level expert group on reforming the structure of the eu banking sector proposed mandatory separation of a deposit bank and a trading entity within the banking group to complement, not to substitute the ongoing regulatory reform. the motivation for our decision to propose separation was the following : first, to limit the spill - over of benefits from the deposit guarantee system and any implicit government guarantees to certain trading activities of banks. second, to simplify the structure of large, complex banks. reducing complexity by means of separation facilitates management and implementation of incentives and it facilitates supervision and monitoring by outside stakeholders such as shareholders, bank creditors and other market participants, thus reinforcing market discipline. third, to make it easier to impose recovery and resolution measures if a bank would nevertheless get into severe problems. simplifying the structure of the bank ex - ante would also serve this purpose. it is crucial to make credible the resolution also of the largest and most trading - intense banks. fourth, to reduce the mixing of two very different management cultures in 1 ) the customer - based retail and commercial banking and 2 ) the transaction - based trading activities. the aim was to shift the focus from short - term to long - term, which is more in line with the interests of the real economy and society at large. the choice of where to draw the line between the deposit bank and the trading entity was made so as to enable banks to service the real economy in the best way possible, while separating the activity that should not enjoy the benefit of the implicit government guarantee. because the difference between proprietary trading and market making is hard to distinguish, the group proposed to keep them together in the separated trading entity. in this way, market making would be provided on equal terms by trading units within banking groups and entities outside the regular banking sector. the high - level expert group also suggested that exposures to shadow banking entities such as hedge funds ought to be separated from deposit - taking and lending activities. finally, we wanted to preserve the universal banking model and keep the trading activity within the bank supervisory umbrella. this would also