risk, strategy and governance rests with the board, including the adequacy of digital and it strategies to deliver and support business strategies and plans. boards must rstly ensure they themselves have the skills and knowledge to meaningfully understand the risks their organisation faces and the responsibilities they bear. in order for the it function to be able to operate within set risk tolerances, boards are expected to allocate and periodically review appropriate it budgets to safeguard the operational resilience of the it framework. in this regard, the central bank expects boards to approve, oversee and review the implementation of business continuity policies and disaster recovery plans. furthermore, boards are expected to obtain independent assurance on it governance by approving and periodically reviewing the it audit plans and by being informed in a timely manner of it related incidents and their impact on their rm ’ s operations17. proposed upstream legislation, such as the eu digital operational resilience act ( in short dora ) 18 or the revised eu directive on security of network and information systems ( nis2 ) 19, will also seek to further strengthen the governance and oversight frameworks of it risk. climate change finally, i want to turn to climate change and sustainability. until recently, these would not necessarily have been seen as areas of legitimate interest of central banks and regulators. it is now clear that the macro - prudential policy, economic advice, nancial stability, and consumer and investor protection implications of climate change put it rmly in the bailiwick of central banks and regulators. as the president of the ecb, christine lagarde, has recently said20, “ inaction has negative consequences, and the implications of not tackling climate change are already visible. globally, the past six years are the warmest six on record, and 2020 was the warmest in europe. the number of disasters caused by natural hazards is also rising, resulting in $ 210 billion of damages in 2020. an analysis of over 300 peer - reviewed studies of disasters found that almost 70 % of the events analysed were made more likely, or more severe, by human - caused climate change. ” in this context, the ecb is assessing how climate risks and environmental sustainability considerations are relevant in the pursuit of its mandate as part of its ongoing strategy review, to which the central bank is an active participant. so, the question becomes not whether we should focus efforts on climate change, but how and what should we focus on. i believe we have a role in both

the negative feedback loop between the banking sector, sovereign debt and the real economy. there are two dimensions to this feedback loop problem : procyclicality – or the interaction between bank lending and the real economy – and backstop burdens – or the interaction between bank recapitalisation and sovereign debt sustainability. procyclicality is the phenomenon by which banking capital rules exacerbate the business cycle by encouraging lending at a time of growth or contracting it in a time of recession. basel 3 aims to build up a countercyclical buffer to lean against the wind in good times and be eased to help growth in bad times. we are evidently in bad times now, so intriguingly this has prompted some to consider whether you should in fact be starting to release the buffer. indeed, you could probably run the basel countercyclical buffer methodology with some plausible assumptions and get to the conclusion that for many countries we are well past the point where the buffer would be released. the problem, of course, is that the buffer is not in place to be eased and, indeed, that there is still a further strengthening of capital required under basel 3. in addition, market expectations are for more capital faster. where they can, banks are responding by racing to meet the new basel standard well ahead of the five year bis central bankers ’ speeches transitional period. in this respect, what the regulator has given – a transitional period to ease the impact of the new rules – the market has taken away. a fair minded regulator should acknowledge that was a concern identified by industry some time ago. all these considerations led the eba to be very careful in design of the buffer in two respects. we made it clear that in calculating the capital buffer the determination of sovereign debt exposure would be fixed at one point in time, so there was no advantage and therefore incentive to dispose of sovereign debt holdings. and we provided tight guidelines limiting the capacity of banks to meet the capital requirement through deleveraging activity – reducing lending – that would hurt the real economy. we have now seen the banks ’ plans to meet the eba ’ s aggregate €115 billion requirement. the assessment is encouraging, with banks ’ providing a margin for error, with very limited deleveraging planned and with overwhelmingly most of the required minimum met by new capital rather than reduced assets. however, eba will of course monitor developments very closely. where should we go next in terms of policy responses? the european banking regulators ’ room for