ii and iii to the fifth assessment report of the intergovernmental panel on climate change ( 2014 ). see www. metoffice. gov. uk / news / releases / archive / 2015 / record - uk - temps - 2014. see ipcc ( 2014 ). see ipcc ( 2014 ) which notes that the effects of anthropogenic greenhouse gas emissions, together with other anthropogenic drivers are “ extremely likely to have been the dominant cause of observed [ global ] warming since the mid - 20th century ”. see, for example, otto et al ( 2015 ). see munich re, natcatservice ( 2015 ). the report “ risky business – the economic risks of climate change in the united states ” ( 2014 ) suggests that in the usa $ 238 - 507bn worth of coastal property could be below sea level by 2100. research by lloyd ’ s identifies climate change as an important supply - side issue for food security. see www. lloyds. com / ~ / media / lloyds / reports / emerging % 20risk % 20reports / food % 20report. pdf. this is consistent with the views expressed by lloyd ’ s market participants surveyed by the pra for its report to defra. bis central bankers ’ speeches climate change is the tragedy of the horizon. we don ’ t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix. that means beyond : • the business cycle ; 9 • the political cycle ; and • the horizon of technocratic authorities, like central banks, who are bound by their mandates. the horizon for monetary policy extends out to 2 - 3 years. for financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. 10 in other words, once climate change becomes a defining issue for financial stability, it may already be too late. this paradox is deeper, as lord stern and others have amply demonstrated. as risks are a function of cumulative emissions, earlier action will mean less costly adjustment. 11 the desirability of restricting climate change to 2 degrees above pre - industrial levels 12 leads to the notion of a carbon “ budget ”, an assessment of the amount of emissions the world can “ afford ”. such a budget - like the one produced by the ip

b mahapatra : underlying concepts and principles of dynamic provisioning keynote address by mr b mahapatra, executive director of the reserve bank of india, at the conference on “ introduction of dynamic provisioning framework for banks in india ”, organised by the centre for advanced financial research and learning ( cafral ), mumbai, 21 september 2012. * * * the contributions made by mrs usha janakiraman and mrs tariqa singh are gratefully acknowledged. thank you very much for inviting me to this conference to share with you my understanding of the underlying concepts and principles of dynamic provisioning. a discussion paper on the subject was brought out by the reserve bank of india ( rbi ) in march 2012. we are still in the process of examining the comments received from banks and other stakeholders and it may take us a while to finalise anything in this regard. why make provisions? let me start the discussion with a question : why make provisions? to my mind provision is an accounting concept. accounting standards define provision as a liability of uncertain timing or amount which can be measured only by using a substantial degree of estimation. the term “ provision ” is also used in the context of items such as depreciation, impairment of assets and doubtful debts : these are adjustments to the carrying amounts of assets. it is a requirement for any entity to assess at the end of each reporting period whether there is any objective evidence that any asset has been impaired as also whether a liability needs to be recognised in settlement of an obligation involving an outflow of resources. when such is the case, the amount is required to be recognised in the profit or loss account for the reporting period. this enables presenting a “ true and fair ” financial position of the entity for the period, which is the raison d ’ etre of accounting. entities have strong incentives for under - provisioning, because : • it is generally not fully tax deductible in many jurisdictions ; and • many business executives take a short term view of showing enhanced profits. high provisioning reduces profits, and hence dividend distribution and share price ; and more importantly, bonus payment to top management and staff. the same holds good for banks also. however, banking business adds another dimension to the issue, that is, of pro - cyclicality. banks are more prone to business cycles. in good times, there is demand for credit and banks become aggressive loosening credit standards. debtors also do well and service the loans in time. loan loss