changing public sentiments, and new laws to govern carbon emission can cause a shift in economic activity towards greener projects. as a result, the value of carbon - intensive assets might drop as investors ’ risk perception and preferences change. sectors like oil, gas, coal and utilities are particularly vulnerable in the long run as transition risk might devalue their assets and displace their workforce. central bank of kuwait - public عام - بنك الكويت المركزي international energy agency ( iea ) estimates that achieving paris agreement target on climate change would require, by 2050, about 80 % decrease in the co2 intensity of the building sector, 95 % of world energy supply to be of low carbon and 70 % of new cars to be electric. this will cause significant, even if slower, shift in the structure of our economies with strong bearing on the financial sector. that is why the ngfs, the central banks and supervisors network for greening the financial system, has argued that ‘ climate related risks are a source of financial risk and therefore fall squarely within the mandate of central banks and supervisors to ensure that financial system is resilient to these risks ’. regulators need to determine how best to incorporate and operationalize climate related risks in their prudential policy settings. it would require expanding the risk matrix to formally include climate related risks and enhancing the analytical tools to assess financial sector exposures to extreme weather events. bank of england has announced that in 2021, it will start stress - testing banks on different climate pathways. ultimately, the key is to retool the regulatory regime to factor in risks to climate change in a holistic fashion, instead of adding on an additional item in the risk matrix. conclusion let me conclude. while we have managed to fix the fault lines exposed by the gfc, our understanding and ability to respond to some of the emerging risks remain limited. this is true for both cyber threats and climate change. a feature common to these risks is their wider impact through multiple entry points. hence, the key to address both lies in sharing information and strengthening cooperation. if we are grappling with risks that transcend sectoral and national boundaries, so should our response. thank you for your attention. 11 / 12 / 2019 central bank of kuwait - public عام - بنك الكويت المركزي

and achieve financial stability at large. central bank of kuwait - public عام - بنك الكويت المركزي the role of effective supervision is also critical because not every risk can be pre - defined in a rulebook. while overseeing the dynamic world of finance, supervisors must be agile enough to suitably correct course in line with the constantly changing nature of the banking industry or the emergence of new risks. in the second part of my speech, i would like to touch upon two such emerging concerns ; cyber threats and climate change. addressing emerging concerns ensuring resilience against cyber threats first, consider the issue of cyber threats. growing footprint of technology is influencing every facet of the banking business, transforming banks ’ internal processes as well as their engagements with customers. as the role of technology deepens from a mere support function to a platform central to everything that banks do, the likelihood of new risks emanating from ubiquitous and connected technologies loom large. materialization of such risks will not only disrupt vital financial services but will also undermine the security and confidence in the financial system. in fact, the scale and sophistication of cyber - attacks is already on the rise. examples include data breach at target of 70 million credit card users, a cyber - attack on equifax compromising data of 143 million customers, and the hacking of over 100 million customers ’ data at capital one bank. no wonder, cyber risk features as a key concern in different industry surveys. for instance, respondents to the bank of england ’ s systemic risk survey of 2h - 2018 quoted the risk of a ‘ cyber attack ’ as the second major threat to the system, only behind the brexit induced political risk. the growing threats of cyber risk need to be reflected in banks ’ operational risk capital charge. incidentally, the basel committee has revised its operational risk methodology by replacing the existing three techniques with a simplified standardized measurement approach and expects that its implementation, due by january 2022, will increase capital risk charge for operational risk by 18 % for a group of banks currently using standardized approach of the old regime. while it is not clear how much of the increase in operational risk charge is driven by the recognition of growing cyber threats, greater capital allocation for operational risk is a step in the right direction, given the increasing significance of such low probability but high impact risks. however, reliance on capital alone will not suffice. supervisors must ensure that banks