a hub to share good practices and insights gained from members ’ experience. likewise, climate change is another overarching concern as it can contribute to the build - up of systemic risks. climate risk is typically broken down into : ( i ) transition risk ( the risk of an abrupt transition towards a greener economy ) and ( ii ) physical risk ( the risk of a rise in the frequency and intensity of natural catastrophes ) – both affect financial institutions. due to unique features, in particular its long - term horizon and uncertainty, climate risk may be inadequately priced by financial markets. besides, it can be amplified by classic systemic risk externalities, such as system - wide common exposures and portfolio correlations, as well as spillovers across the financial system and the real economy. the esrb, together with the ecb, published two reports, in 2020 and 2021, which have contributed to the assessment of the systemic impact of climate risk, including via stress tests and scenario analyses. last year, another report13 analysed how climate risk shocks could spread throughout the financial system, harming companies and banks alike. transition risks stemming from, for instance, a surge in carbon prices may be magnified because of economic and financial linkages between and across financial institutions and companies. interdependent natural hazards, such as water stress, heat stress and wildfires – which are painfully familiar to us in spain – can amplify physical climate risk, as they can cluster together and exacerbate each other. market dynamics can also magnify the financial impact of physical risks. given the identification of potential systemic financial risk associated with climate change, it is necessary to study the development of appropriate macroprudential policy tools to tackle it in a manner consistent with prudential mandates to preserve financial stability. for the near term, the esrb - ecb report suggests the adaptation of existing regulatory instruments, such as the systemic risk buffer or concentration thresholds, as a possible avenue to tackle climate risk in the banking sector. in any case, this is a task that demands joining efforts between macroprudential policy and microprudential supervision, and taking adequate stock of developments in other policy realms, such as fiscal and monetary initiatives. advancing macroprudential tools for cyber resilience, esrb report, february 2023. the macroprudential challenge of climate change, july 2022, by ecb / esrb project team on climate risk monitoring. conclusion the

esrb ’ s general warning that i referred to in the first part of my intervention called for heightened awareness of risks to financial stability. recent bank instability episodes outside the eu are a further reminder that we need to remain vigilant. the resilience of the financial system is essential. only a resilient financial sector will be able to support the real economy during times of stress, 14 and all financial authorities and institutions across the eu must contribute to this end. in this regard, regulatory actions and policies towards banks and nbfi intermediaries must aim to preserve shock absorption capacity in the form of capital and liquidity buffers. see also macroprudential policy in europe : building resilience in a challenging environment, welcome remarks by christine lagarde, president of the ecb and chair of the european systemic risk board, at the sixth annual conference of the esrb, december 2022.