. the increased frequency of severe weather events such as heatwaves and storms will affect both the uk and the eu. after all, climate change knows no borders. we collectively face the consequences of climate change and this calls for collective action. from the very start, the uk has been an inspiring companion in joint efforts to tackle climate change by putting climate - related risk on the agenda of central banks. and in supporting the growth of the green finance market. at the initiative of the banque de france, eight central banks established the network of central banks and supervisors for greening the financial system at the paris “ one planet summit ” in december 2017. both the bank of england and dnb were part of this initial coalition of the willing. since then, this network has grown to 54 members and 12 observers representing 5 continents. the bank of england greatly contributed to the achievements of the network for greening the financial system and the rapid expansion of its membership. and the bank of england will undoubtedly continue to contribute to the important work of the network in the future. the importance of eu - uk cooperation on climate change, of course transcends the efforts of this network. we also need global and aligned action to limit our carbon emissions and to minimize the effects of climate change. as carbon prices increase over time, coordination between countries becomes increasingly important to ensure a level playing field for carbon - intensive sectors. i hope today ’ s discussion can provide further insights on the role that academics and central banks can play in this respect. and i trust that the eu and the uk will continue to collaborate closely on this, given that we clearly have a shared interest in doing so. likewise, the third topic of today ’ s conference – regional economic inequality – is clearly also a subject that transcends the topic of brexit. nonetheless, the lack of regional economic opportunities may not only have contributed to the uk ’ s brexit - vote, but brexit itself will also impact regional economic prospects. not just in the uk, but also within the netherlands and other eu countries. for example, a study by the netherlands environmental assessment agency, shows that – in the event of a no - deal brexit – the regional impact in the netherlands differs significantly : regions in the netherlands with relatively less economic activity, will probably take a bigger hit. 3 the european union has several policies and programs in place to support regional economic development, such as the european regional development fund. brexit will not make

market share, combined with unrealistic expectations about growth and performance prospects. but no matter how much risk exposures get sliced, diced and distributed among financial market participants, financial innovation cannot mask poor underwriting. at the same time, the additional complexity, opacity and leverage resulting from certain structured products and offbalance sheet vehicles further magnified the problem, as it has not been sufficiently clear where the ultimate risk lies. this brings me to my second point. risk management infrastructure and financial innovation indeed, the second fundamental shortcoming is the wide disparity between the rapid pace of financial innovation and the risk management infrastructure on which this innovation was built. when i spoke at last year ’ s garp conference, i noted that the linkages between the various segments of the credit markets and financial institutions had been fundamentally altered. this is mainly due to increased market - based credit intermediation, or the originateto - distribute model. historic or statistical measures of risk and exposure, such as value - at - risk, past loss experiences and name concentration in the traditional banking book have proved inadequate when assessing relationships in the originate - to - distribute model and how they may perform under stress. in fact, the use of these and other historic measures resulted in a massive understatement of stressed losses, which were far below the actual losses experienced to date. as i suggested at last year ’ s conference, the greater reliance on securitisation and other risk transfer mechanisms means that banks are more vulnerable to exposures building up or returning to the balance sheet when market liquidity seizes up. in addition, increased reliance on market liquidity means that problems in financial markets can adversely – and very quickly – affect banks ’ funding liquidity. however, for those institutions that stress test funding capabilities, many only assumed a firm - specific event. the problems arising from poor underwriting were compounded by failures to manage firmwide concentrations. many firms were unaware of their overall exposure to subprime mortgages and related structured products, such as cdos, whose repayment depend on such mortgages. these concentrations went far beyond traditional loan portfolio exposures and included cdos and mortgage - backed securities held in the trading book ; liquidity facilities extended to conduits ; reputational exposures to sponsored sivs ; and counterparty exposures to the monoline sector. in addition to failing to understand their firm - wide concentrations, many institutions could not readily nor easily aggregate their subprime exposure