banks'business models and their future profitability. moreover, by establishing a harmonised framework for its supervisory activities through the single rulebook, the ecb has reduced the fragmentation that existed previously. and the srep reform is another important milestone in our efforts to better assess risks while stabilising the methodologies we use. however, much of the work that still needs to be done falls outside of the ecb's remit. a strong supervisory framework plays a key role in supporting the growth and competitiveness of the economy but will never replace the need for structural reforms to boost productivity. 3 / 4 bis - central bankers'speeches other factors will also play a major role, such as changing demographics, including ageing societies, and geopolitical risks. overall, the profitability of european banks has increased significantly in recent years, but they need to continue adapting to a changing environment presenting a cluster of challenges. long - term investment and a strong capital base will be crucial for banks to meet these challenges. from the ecb's perspective, there is no room for complacency. 1 directive 2013 / 36 / eu of the european parliament and of the council of 26 june 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending directive 2002 / 87 / ec and repealing directives 2006 / 48 / ec and 2006 / 49 / ec ( oj l 176, 27. 6. 2013, p. 338 ). 2 conference of the parties ( or " cop " ) to the united nations framework convention on climate change ( unfccc ). 3 di vito, l., martin fuentes, n. and matos leite, j. ( 2023 ), " understanding the profitability gap between euro area and us global systemically important banks ", occasional paper series, no 327, ecb, august. 4 ecb ( 2024 ), digitalisation : key assessment criteria and collection of sound practices, 11 july. 4 / 4 bis - central bankers'speeches

the second half of 2024, and will be finalised for the 2026 srep cycle. the srep reform will enable us to be more efficient, more comprehensive, and more effective – and will enhance our communication with banks. allow me to elaborate further on my point by taking climate and nature - related risks as an example. the eu legislator did not invent climate risk or the burden of ensuring an orderly transition. the risk has been around for a long time. the intergovernmental panel on climate change ( ipcc ) was created in 1988 to provide scientific assessments and recommendations related to the current state of knowledge about climate change. the paris agreement was adopted in 2015 at the un climate change conference cop212 after the fifth assessment report of the ipcc. so clearly, all the facts have been on the table for decades. the latest tragedy in spain has shown that the financial cost can severely hit the economy, not just at the regional but also at the national level. and we have many other recent examples showing the macro - financial relevance of climate and nature - related risks. on the one hand, the cost of the transition will be high. on the other hand, analysis consistently confirms that the costs of doing too little too late are much higher. the ecb supervisory stress test in 2022 confirmed this analysis for the banking sector. the reinsurance sector, which is exposed to natural catastrophes more routinely than the banking sector, has clearly understood this and shown that, without rapid adaptation, insurance could become unaffordable in some regions. regrettably, the prevailing consensus in climate science tells us that we are far from on track to meet the goal of limiting global heating to two degrees celsius, as set out in the paris agreement. diluting regulation, supervisory intensity and effectiveness will do nothing to change the scale and magnitude of these risks, either in the very near future or in the medium and long term. instead, we need to renew our efforts and banks 2 / 4 bis - central bankers'speeches need to demonstrate their ability to correctly assess and properly manage these risks – risks which will undoubtedly have a negative impact on their profitability and resilience. digitalisation is another important factor that will drive bank profitability in the future. and once again, the facts leave no room for doubt. customers expect the same from their banks as they do from any other business : they want to be able to easily access all of the services associated with their bank account