##udential factors play an important role in determining the size, nature, and propagation of systemic risk. therefore, it is essential to establish an effective framework for macro - prudential supervision that will ensure a systematic analysis of risks, as well as the formulation of policies to address such risks. let me say a few words about the framework for macro - prudential supervision envisaged for the e. u. following the publication of the report of the de larosiere group in february 2009, the commission issued a package of draft legislation in late september with the aim of creating a european systemic risk board – or esrb. the main task of the esrb will be to identify and assess risks to the stability of the eu financial system and issue risk warnings when the identified risks appear significant. several features of the proposed framework are important. • first, the european system of central banks will play a key role in the functioning of the esrb. the voting members of the esrb ’ s general board will include the 27 governors of the eu ’ s national central banks and the president and vice president of the ecb. • second, the ecb will be assigned the task of ensuring sufficient human and financial resources for the esrb ’ s secretariat. • third, the esrb will not be responsible for the implementation of macro - prudential policies. that responsibility will remain with national authorities and national supervisors. • fourth, since the esrb will not implement macro - prudential policies, the effective monitoring of the follow - up to its warnings and recommendations and the consistent and timely implementation of the recommendations will be crucial for the performance and the credibility of the new macro - prudential supervisory framework. the creation of the esrb will, in my view, constitute a historic step forward, putting in place an important building bloc of an eu financial - stability framework that is consistent with the objectives of creating a single market. challenges for southeastern europe some of the policy challenges facing the euro area also need to be addressed by the countries in southeastern europe. moreover, many of the countries in southeastern europe are confronted by additional challenges. let me mention some of these challenges, as well as some questions that we may wish to consider during the course of this conference. • first, prior to the crisis many countries in the region ran large current - account deficits underpinned by capital inflows. as the crisis demonstrated, however, capital flows can be subject to abrupt and sharp reversals. what

circular business models, managing related risks and exploring opportunities, such as the redesign and manufacturing process of products and services, digital solutions, waste management models, etc. at the moment though, financial institutions lack awareness of circularity and still need to develop expertise, products and services to harness opportunities. of course, there is also an important role for governments and policy makers that need to provide incentives, policies and frameworks in order to integrate circularity into financial products and services alongside current planning for the transition to a carbon neutral economy. there is no question that climate change is today one of the most pressing sustainability challenges we are currently facing. in this context, the process of addressing climate change can undoubtedly be accelerated if established growth models are adjusted in order to ensure long - term sustainability. it is therefore important in tackling climate change to plan for a double transition, to a carbon neutral and circular economy. in this double transition, there are indeed certain risks. for example, transition risks as assets may become stranded or businesses that may incur costs and disruptions. yet, a careful and timely transition will also open up opportunities, associated with innovation and new technologies, circular and renewable energy products, new processes, new infrastructure and new jobs. although methodologies for calculating climate - related risks are still being developed, estimates suggest that the impact of these risks is likely to be significant. for example, the ecb has estimated that, on average, 15 % of significant institutions ’ exposures are to the most carbon - intensive firms and an abrupt transition to a low - carbon economy could have severe impact on climate - sensitive economic sectors. [ 3 ] regarding physical risks, around 30 % of the credit exposures of euro area banks are to businesses with high or increasing exposure to at least one source of physical risk. in this context, central banks and supervisors are progressively looking into playing an active role in the debate and working with banks to prepare for and manage climate risks. indeed, as part of the strategy review the ecb is already exploring ways of taking the risk of climate change into account. it is clear however that since climate change poses risks to price stability, central banks could, within their traditional mandate, advance their efforts to support the transition to a sustainable economy and a resilient future. central banks can help by considering how the physical and transition impact of climate change can be included in macroeconomic forecasting and financial stability monitoring. also, central banks can help by integrating climate - related risks into prude