fout! onbekende naam voor documenteigenschap. “ discussing financial risks during wildfire ” dinner speech by frank elderson at the frbsf conference “ the economics of climate change ” san francisco, 8 november 2019 at the conference ‘ the economics of climate change ’ the san fransisco frb invited frank elderson for a keynote dinner speech. frank elderson, chair of the ngfs and board member of de nederlandsche bank, showed how climate change – as a twofold driver of financial risk – is a serious topic for ngfs members around the globe. fout! onbekende naam voor documenteigenschap. the smell was inevitable. the smell of smoke. the smell of wildfires. i have been to your beautiful state before. i remember seeing the magnificent golden gate bridge rising up out of the san francisco fog. but now in europe and around the world we see images of the bridge shrouded not in the famous fog, but in a smoky haze. and this smoke is so heavy that you can ’ t only see it. you can smell it, even taste it. and it is the smell of an omnipresent catastrophe. behind this smell are stories of despair. it is the smell of the burning vineyards and buildings of the historic soda rock winery, which stood for 150 years. it is the smell of marcella and james shirk ’ s home going up in flames, which they had lived in for the last 42 years. it is the smell of fire threatening the rivas family home again. the same home they watched burn two years ago and painstakingly rebuilt. it is the smell of the smoke that has kept schools across the state closed for days and sometimes weeks. interrupting the education of one in six children in california. it is the smell that has prompted enforced power outages, leaving thousands of families and businesses without power. it is the smell of entire destroyed communities, built on the wildland - urban interface because it is too expensive to build in town. of course, not counting the terrible mental anguish, there is also the heavy economic price to pay. because the vineyard that has burned to the ground, next to providing us with the beautiful californian wines we are probably drinking right now, provides work and attracts tourists. the elderly couple whose home has burnt to the ground don ’ t have enough money for their retirement. the family whose house is threatened can ’ t afford

investment and foreign borrowing ). the only reason why serbia is not in the same category as these countries are its high foreign exchange reserves, restrictive monetary policy and banking supervision. i must say i am rather pleased that armchair critics are now praising my “ farsightedness ” and “ conservativeness ” which have turned out to be the key buttress of stability of the serbian financial sector. 3. and finally, we need to face the long - term effects of this crisis which will certainly last much longer than was expected several months ago. when i speak of these effects, i will focus on our region and country : • the government is returning in style, and i am, personally, slightly apprehensive of this because of my experience with the government and its mechanisms. the role of the government will increase, both in the financial and in the real sector. the only hope left is that this role will remain indirect, rather than direct, and that it will be of limited duration! • the role of financial sector supervision will gain strength, both locally and in the eu. there is always a positive side to any crisis, and now europe has understood that a single monetary and economic union is incompatible with a nationally - based financial sector supervision. this is simply a negation of reality. • the old adage : “ what you pay is what you get ” best illustrates the period ahead of us. domestic deposits will come to play a key role in financing both enterprises and households. and because of this, we will need to invest even more efforts to maintain a stable financial sector and build up public trust in the banking sector. this will be a major challenge, especially given our recent history and the efficiency of the media in whipping up unnecessary panic. • the banking industry is in need of a thorough overhaul! not only will the job of supervisors finally receive the respect and appreciation it deserves, but commercial bankers will also have to tighten their belts a little and be more realistic. and just one final comment : although, as central bankers, it is our job to be “ concerned ”, this time there is really much cause for worry. that i, at my 40 years of age, am concerned is perhaps not as important as the fact that reputed central bankers of 60 and more are – and they have already been through thick and thin. but the challenges we are now facing are also an opportunity, and i am sure that once again we will come out as winners!