bank watch discusses monetary policy trade - offs in an environment of high inflation, and whether the costs of high inflation after a cost - push shock are exaggerated in our modelling system. they point out that an optimal monetary policy response depends on the nature of the economic shock and the transmission of monetary policy. at the same time, the cost of high inflation must be measured correctly. let me first say that these are the very questions that have featured in the discussions of our monetary policy and financial stability committee over the past year. among other things, we have devoted considerable time to assessing the effect of higher interest rates on household disposable income and the relative importance of the nominal and real interest rate. the results were also presented in a box in the june 2022 monetary policy report. 2 / 3 bis - central bankers'speeches at the same time, the conduct of monetary policy is not mechanistic. models are useful, but they are simplifications and must be supplemented by other information. for example, loss functions in such models cannot be directly interpreted as the committee's view of inflation costs. as the deviation from the target increases, we need to assess the risk of high inflation becoming entrenched in the expectations of households, firms and fx market agents. if this were to happen, we may find ourselves in uncharted territory, where the costs are far higher than when inflation expectations are anchored to target. as last year, norges bank watch notes that norges bank's fx transactions related to tax payments to the government result in volatility in the money market premium. as long as the short - term money market functions well, norges bank will not seek to steer such risk premiums. but we do not want to contribute to needless volatility, which is why we seek to make fx transactions as smoothed and predictable as possible. the ministry of finance is now appointing a working group, in which norges bank will participate, tasked with examining various aspects of the government's liquidity management. the practical implementation of the petroleum fund mechanism is one of the topics for discussion. among the matters the working group will consider is whether the number of due dates for petroleum tax should be increased. let me conclude by again thanking norges bank watch for an excellent report. as i stated in my introduction, such an assessment is very useful for us, and we will take the committee's recommendations on board in our work going forward. thank you for your attention

a year, to reflect the latest market developments. other standards established by the climate bond initiative and the credit rating agencies have also defined criteria for assessing the degree of “ greenness ” of issues earmarked for certain projects. some jurisdictions, such as china, have set their own standards. 7 / 9 all the banks are working with esg sustainability factors, 5 with the lack of a common taxonomy being one of the main challenges for defining these factors. but very few banks have processes and tools allowing them to identify, measure and manage environmental risk. the supervisory expectation in the short and medium term would be for all banks to include the environmental dimension in their strategic approach and in their risk analysis and monitoring. they should keep the board informed and should compile all relevant information, at least for new operations. from a methodological standpoint, banks are at least expected to understand the implications of environmental risk and how it may affect their business models, including it in their risk appetite frameworks. in all cases, in a way that is proportionate to their size and complexity. as this is a new development, we have also started work on a document that will reflect all these supervisory expectations. we hope to publish it for consultation shortly. in addition to directly interacting with banks, we have entered into a dialogue with other agents, such as the big auditing firms, and we are also organising sessions and workshops to discuss methodological developments, for example relating to risk measurement in investment portfolios. the role of supervisors – in - house initiatives as well as these initiatives, which may be considered external, we are also working in the banco de espana to adapt to this new reality. firstly, we have created an internal function entrusted with assessing the impact we as an institution have on the environment. the aim is to articulate and coordinate the necessary measures to reduce that impact. secondly, as a macroprudential supervisor, we clearly need to be able to assess and quantify the risks that the transition towards a more sustainable economy poses, both for individual banks and the financial sector as a whole. among other functions, we need to be able to assess the level of financial institutions ’ exposure to high - carbon emission activities, perform stress tests for the financial system overall and define scenarios and methodologies to be applied by banks individually. in consequence, we are designing internal governance structures and methodologies, actively participating in the cultural shift in the ssm supervisory model. naturally, we are also evaluating the information and data