speech by frank elderson, at the ` climate is big business´ conference – san francisco, 24 may i have a confession to make. i ’ m a banker. not just a banker, but a supervisor of banks. a central banker. so what on earth is someone like me doing at a conference about sustainability? after all, my industry has a reputation for being grey, not green. concerned with greenbacks, rather than green banks. pinstripes, not pine trees. but today i ’ d like to talk to you about why the smart money is on green finance. why we have to take on the challenges together. why we need to make the sustainable development goals work. why bankers should act today i want to reach out and share with you some of the insights we have learned as a central bank. because most of these issues are not just confined to the financial sector. first i ’ d like to explain why you should focus on sustainability. twenty years ago a company often would only ‘ go green ’ for reputational reasons. but today there are other reasons why you cannot afford to ignore sustainability. sound risk management means the financial sector needs to worry about sustainability risks. we simply cannot sit back. because we have reached the stage where the cost of inaction is greater than the cost of action. suppose you have major investments in high - carbon assets. these assets have retained their value for many years in the past. but can we just assume that these assets will retain their value in the years to come as well? of course not. during the transition to a low - carbon economy, these assets could become unwanted or obsolete, as new, cleaner and cheaper energy replaces them. this audience is full of disrupters that work day and night to bring about that very transistion. under new laws limiting the use of fossil fuels, ‘ old ’ forms of energy may even need to stay in the ground. these valuable assets could become stranded. in the financial sector we call this the carbon bubble. and we must make sure that the big green bang does not cause this carbon bubble to burst. so be aware of the risks and manage them properly. but besides risks, a more sustainable economy also offers us opportunities. we are seeing this happening right now in the financial sector, where the issuance of green bonds is growing fast, but it is of course evolving across all sectors in all continents. how – and where to start while it is clear that the business community needs to take on

real house price in the u. s. increased by more than 40 percent between 2002 and 2006, while u. s. loan growth, particularly mortgage loans, accelerated during the same period. these signs were also present in east asia before the 1997 crisis. in the current crisis, the securitization boom and the easing of monetary policy in the us helped fund the loan growth, while in the case of the asian financial crisis, it was the large capital inflows in the form of direct borrowing that funded the credit boom. in both cases, however, poor underwriting standard by banks was an important common contributing factor. looking back, the asian financial crisis has been an important turning point for policymakers in the region, as the lessons learned from the crisis had led to many important policy reform initiatives, all of which aimed at strengthening the robustness and the risk management discipline of the domestic financial systems, and this brings me to my second point. in the case of thailand, after having restored financial stability in the early 2000s, financial reform became a top priority, with emphasis on instilling prudent regulations and strong risk management. we adopted a macro - prudential approach in the early 2000s, in recognition of the systemic linkages between the financial system and the increasingly opened macroeconomic conditions ; utilizing our natural institutional advantage as we continue to oversee both monetary policy and financial institutions supervision. hence, from 2003 to 2006, a series of macro - prudential measures were introduced, aiming at restraining then the rapid growth of credit, especially credit card loans and mortgage loans. the preventive measures that were introduced included placing limits on the loan - to - value ratio for luxury mortgage, raising minimum repayment requirements for credit cards and personal loans, and strengthening npl provisions by fair valuation standards of ias39. looking back, these measures have been useful in curtailing excessive leverage and household indebtedness, thus helping to maintain stability in our domestic financial system. risk - based supervision was a key driving force to strengthen risk management practices of our financial institutions. financial institutions and central bank laws have been overhauled to keep up with the increased complexity of the financial system. the new financial institutions business act, enacted last august, empowers the bank of thailand with the authority to regulate banks and non - banks under a consolidated supervision regime. furthermore, risk management and governance practices of financial institutions have also been strengthened. board of directors are now held accountable by law for setting the strategic and