. in an environment of low interest rates and a well functioning financial system, household debt has risen by another 13 percentage points, relative to income. canadians are now more indebted than the americans or the british. our current account has also returned to deficit, meaning that foreign debt has begun to creep back up. the funding for these current account deficits has been coming largely from foreign purchases of canadian portfolio securities, particularly bonds. moreover, much of the proceeds of these capital inflows seem to be largely, on net, going to fund canadian household expenditures, rather than to build productive capacity in the real economy. if we can take one lesson from the crisis, it is the reminder that channelling cheap and easy capital into unsustainable increases in consumption is at best unwise. canada ’ s relative virtue throughout the debt super cycle affords us a privileged position now that the cycle has turned. unlike many others, we still have a risk - free rate and a wellfunctioning financial system to support our economy. it is imperative that we maintain these advantages. fortunately, this means largely doing what we have been doing – individuals and institutions acting responsibly and policy - makers executing against sound fiscal, monetary and regulatory frameworks. it cannot entirely be business as usual. our strong position gives us a window of opportunity to make the adjustments needed to continue to prosper in a deleveraging world. but opportunities are only valuable if seized. first and foremost, that means reducing our economy ’ s reliance on debt - fuelled household expenditures. to this end, since 2008, the federal government has taken a series of prudent and timely measures to tighten mortgage insurance requirements in order to support the long - term stability of the canadian housing market. banks are also raising capital to comply with new regulations. canadian authorities are co - operating closely and will continue to monitor the financial situation of the household sector. to eliminate the household sector ’ s net financial deficit would leave a noticeable gap in the economy. canadian households would need to reduce their net financing needs by about $ 37 billion per year, in aggregate. to compensate for such a reduction over two years could require an additional 3 percentage points of export growth, 4 percentage points of government spending growth or 7 percentage points of business investment growth. any of these, in isolation, would be a tall order. export markets will remain challenging. government cannot be expected to fill the gap on a sustained basis. but canadian companies, with their balance

years since we started taking concrete steps to include c & e risks in our ongoing supervision. in 2020 we published a guide on c & e risks, which outlined our expectations for the management and disclosure of these risks. in 2021 we published a report on banks ’ self - assessments of where they stood relative to those expectations and shared some of the good practices we had observed in the banking industry. early in 2021 we also asked all banks under our supervision to devise concrete action plans for ensuring full alignment with our expectations. banks provided us with such plans, and where we found them deficient, we asked them to be sharpened, which was subsequently done. in 2022 we continue to check progress under these action plans by assessing whether banks have advanced the plans submitted in 2021 and the extent to which they use them as an effective steering instrument to advance their c & e risk practices. moreover, in 2021, for the first time, c & e risks were qualitatively integrated in the supervisory review and evaluation process ( srep ). this year, our joint supervisory teams will complement the srep assessments with their observations from a climate risk stress test and a thematic review on how banks incorporate these risks into their day - to - day business. this will also be qualitatively integrated in the srep scores, which may have an indirect impact on minimum capital requirements. we are also launching on - site inspections of banks ’ management of these risks and are rounding off a targeted review focusing on commercial real estate exposures. all initiatives – the stress test, the thematic review and the on - site inspections – aim to monitor banks ’ alignment with the expectations set out in the ecb ’ s guide on c & e risks. they are part of what i described at the start of the year as a move towards an immersive approach to the management of climate - related and environmental risks in the banking sector. [ 1 ] we intend to fully integrate c & e risks in the regular supervisory dialogue and cycle and keep them there, treating them in the same way as any other material risks that banks face. the climate risk stress test, the results of which will be published in july, constitutes an unprecedented effort, also on the ecb ’ s part, to more fully understand how exposed euro area banks are to c & e risks. it will also give us a clearer picture of how resilient they are against these risks, as we are assessing, among other things, banks ’ climate risk stress