their ecological footprint. 24 but equally importantly, the ecb is subject to the treaty requirement to “ act in accordance with the principle of an open market economy with free competition ”. in the end, the treaty grants the ecb a high degree of independence and it enjoys broad discretion in implementing its policies. we thus need to carefully weigh all relevant considerations and determine the actions that would be both legal and effective in promoting environmental protection without interfering with the main objective of the ecb ’ s monetary policy under the treaty, which is price stability. views and opinions certainly differ here. but i would argue that the ecb, acting within its mandate, can – and should – actively support the transition to a low carbon economy, in two main ways : first, by helping to define the rules of the game and, second, by acting accordingly, without prejudice to price stability. 25 our actions to protect the environment begin with reducing our own ecological footprint. in 2007 we adopted an environmental policy and registered with the european eco - management and audit scheme. for more, see ecb ( 2018 ), “ 2018 update of the ecb ’ s enviornmental statement ”, october. much of this is already happening, although i have no doubt it will intensify in the future. the ecb, together with other national central banks of the eurosystem, is actively supporting the european commission ’ s sustainable finance agenda. 26 5 / 9 bis central bankers'speeches we are doing this by supporting ongoing work in various international and european fora aimed at enhancing the pricing of climate change and transition risks and promoting the reorientation of financial flows towards sustainable investment products. 27 a tangible side effect of these measures is that, once adopted, they will automatically be reflected in our collateral framework. that is, once markets and credit risk agencies price climate risks properly, the amount of collateralised borrowing counterparties can obtain from the ecb will be adjusted accordingly. we have also joined the central banks and supervisors network for greening the financial system. ecb staff are contributing in all three work streams. my presence here today emphasises that we take our membership seriously. the network will play an important role in coordinating work among central banks and in defining and promoting best practices. finally, we are also supporting work on sustainable finance - related topics at the level of the g20. central bank asset portfolios differ in their ability to support sustainable investment the second step relates to incorporating these best practices into our own activities

one of the most important issues now in the repair process is how banks adapt to the challenging business environment that has been bequeathed by the crisis. the banking sector in transition the euro area banking sector remains in transition. at present banks generally have low revenues and profitability arising from several factors, including legacy factors such as loan losses during the crisis ; cyclical factors such as the weak macroeconomy ; and in some cases regulatory factors such as the costs of adapting to new legislation. this is reflected in historically low returns on equity : the median return on equity for euro area significant banking groups is currently 5 %. it is unlikely, and indeed undesirable, that we will see a return to the high returns on equity we saw before the crisis, which were distorted in particular by excessive leverage and maturity mismatch. 2 banks nonetheless face expectations from shareholders to raise profitability and returns on equity above their current levels – as reflected in a rather high cost of equity – which many will have to react to by adapting their business models. this could involve a variety of measures, including repricing loans, reducing operating costs or streamlining business models – for instance, by shrinking credit provision in less profitable business lines, or exiting those business lines altogether. as policymakers we are in principle indifferent to how individual banks respond. but some of these strategies, when aggregated, may have system - wide effects that, as monetary policy operates mainly through banks, become relevant for our policy objectives. for example, altunbas, manganelli and marques - ibanez ( 2011 ) document that over - reliance on market funding was a major source of bank risk in the recent crisis. see altunbas, y., manganelli, s. and marquesibanez, d. ( 2011 ), “ bank risk and business models during the great recession ”, ecb working paper no. 1394. bis central bankers ’ speeches for example, repricing may counteract our monetary policy objective to ensure there is sufficient financing for a robust economic expansion. if banks lower costs in the short - term through underinvestment rather than efficiency gains, this may undermine their viability over the longer - term. and perhaps most importantly, if banks exit certain business lines due to the pressures of the difficult environement, this may imply cutting back on types of lending that are macroeconomically important, such as lending to smes or long - term infrastructure financing. part