an annual surveillance remit for the fund ’ s managing director - an idea endorsed by the imfc last april. there are a number of overlapping mechanisms for setting priorities and assessing performance which now operate across the broad range of the fund ’ s work programme, through the executive board. but a surveillance remit would provide a sharper means for holding fund management and staff to account for their performance on this key aspect of their work. of course, it would need to work with the grain of the fund ’ s overall governance arrangements. this throws up two tricky issues. first, who sets the remit and how? and second, how is the fund ’ s performance to be evaluated, and by whom? these issues require detailed consideration, but let me offer a few thoughts. first, the process for setting the remit probably needs to involve both the fund ’ s executive board and the imfc : the board, because it is the body formally charged under the articles with the oversight of surveillance ; and the imfc, because of its heavyweight political composition. the involvement of the most senior policy - makers matters, because by endorsing the remit they are effectively giving the fund a license to discuss their policies. this is empowering to the fund. one way for this to work might be for the board to present a draft to the imfc for discussion at the spring meeting each year, taking its cue from the imfc communique issued the previous autumn. second, one obstacle to relying exclusively on the executive board to evaluate the fund ’ s performance arises from the position of the managing director, who is both chair of the board and head of the fund staff. but the md ’ s position is embedded in the articles and raises much wider issues of governance. in the short term at least, this argues for giving a significant role to the imfc. third, the technical challenges in assessing the effectiveness of surveillance are formidable. this points to giving an important role to the ieo which, since its foundation in 2001, has been building up relevant expertise in assessing various aspects of the fund ’ s work. how much difference can imf surveillance really make? this brings me to the crux of the matter : can imf surveillance really make much difference, even if it is reformed in the way i have described? it is important to recognise that surveillance - especially multilateral surveillance - is a very different kind of activity from the monitoring of reform programmes that may be linked to fund financial assistance packages

seen. 8 a sharp shift towards a new equilibrium as a result of recognising the full extent of this market failure could create significant financial losses in a ‘ climate minsky moment ’. maintaining monetary and financial stability in light of these risks therefore demands a timely, coherent and coordinated policy response from the authorities. the importance of the bank ’ s role in this has been recognised through the chancellor ’ s recent remit and recommendation letters to the bank ’ s policy committees, which set out that the transition to a net - zero economy is now a part of the government ’ s economic strategy that the committees must have regard to. 9 so what does this mean a central bank should do in practice? financial system first, and foremost, it means building resiliency at a micro and macro level. we do this by ensuring the financial system proactively manages and pre - emptively mitigates the financial risks from climate change. that task falls squarely within the mandate of the prudential regulation authority ( pra ) and the financial policy committee ( fpc ). the pra has set supervisory expectations for banks and insurers to ensure they adopt a strategic approach to climate change and develop capabilities to effectively identify, measure, manage, and where outside appetite, mitigate the financial risks from climate change. this is a necessary component of protecting the safety and soundness of pra - regulated firms. the fpc, alongside the prc, will launch next week a climate change biennial exploratory scenario exercise – the cbes – to assess the resiliency of individual banks, insurers and the wider financial system to different climate scenarios. this type of scenario modelling and analysis is critical to enabling real decisions on climate - related risks by financial firms and policymakers. assessing resiliency against a range of scenarios enables us to prepare for what might happen in the absence of certainty about what will happen. 2 / 5 bis central bankers'speeches some have called on us to go further and incentivise change through imposing lower capital requirements for ‘ green ’ exposures and higher capital requirements for ‘ non - green ’ or carbonintensive exposures. as the prudential regulator, any incorporation of climate change into regulatory capital requirements would need to be grounded in robust data and be designed to support safety and soundness while avoiding unintended consequences or compromising our other objectives. in my view, the case for this has yet to be clearly established and possibly may