use to measure credit risk, let alone market risk. the modelling of the environmental transition poses a difficulty in that it did not take place in the past ; accordingly, this risk cannot be estimated and validated on the basis of past experience. nonetheless, in our recent past there have been clear examples of other “ transitions ”, even though they cannot be classed as environmental ones. we can readily find examples of solvent, strong companies that have lost their leadership position, or even disappeared, in just a few short years, having been unable to adapt to technological change or changing consumer behaviour. in short, because they did not adapt to a change in the environment. i would highlight two points. firstly, that the analysis of potential changes in setting that can affect business solvency is an essential part of risk assessment and management in the financial system, irrespective of whether this change in setting is caused by technological, customer behaviour - related, regulatory or environmental factors. secondly, we should not lose sight of the fact that the environmental transition has indeed been planned and announced. i have already pointed out that the european commission ’ s goal is to achieve a fully decarbonised economy by 2050. this is a reasonably long term, but achieving this goal will necessarily entail regulatory and structural changes in the economy, which will particularly affect specific sectors of activity. so we cannot say that this transition has come as a surprise or that we were not warned. in addition, we should not forget that transition risk may also materialise as a result of changes in people ’ s behaviour, which in practice may foreshadow future regulatory changes. one clear conclusion would be that when it comes to assessing transition risk, we should not focus on our past but should look to the future. indeed, if we analyse the information available in the banco de espana ’ s central credit register, we can see that after the 5 / 9 outbreak of the crisis, credit exposures financing polluting activities had lower default rates than other exposures. if we eliminate the bias in these findings resulting from the inclusion of construction and real estate activity, which should not be included under either polluting ( “ brown ” ) or “ green ” activities, polluting activities continue to have a lower default rate, although the gap between the two is much narrower. in any event, i believe the findings are unsurprising. many companies labelled as “ brown ” have high profit margins and their ability to generate profit is partly a result

##ive hours of discussion with the committee, its working groups and member authorities. above all, banks and other private sector bodies helped us to ensure that supervision would be more closely aligned to sound industry practices. a second group would be those supervisory agencies, central banks, multilateral financial institutions, and other public authorities around the world who shared with us the perspectives and needs of banking systems that are based in many different markets, economies, and legal systems. thanks to discussions with these colleagues, such as through joint working groups like the core principles liaison group and through regional consultations and meetings, the committee was better able to ensure that the new framework would be relevant to many different kinds of banks and economies that are in various stages of growth and development. the cooperation of so many public authorities worldwide has helped to make basel ii a truly global product. the committee will continue to seek opportunities to deepen its relationships, and its opportunities for discussion, with other supervisors and central banks in the months and years ahead. of course, this work would have been impossible without the sponsorship of the bank for international settlements. i would like to offer my sincere thanks to malcolm knight, the general manager of the bis, for his institution ’ s support of our work on basel ii. the bis has been a staunch ally and advocate for our work over the entire thirty - year history of the committee. with regard to basel ii itself, the bis is fostering a greater understanding of the new framework among central bankers and supervisors worldwide through programs organised by its financial stability institute, the “ fsi ”. the committee looks forward to continued collaboration with the bis on matters related to financial stability. basel ii represents a genuine success story in international cooperation. and we know that our need to cooperate and to collaborate does not end when we release this framework. indeed, under basel ii, supervisors and central bankers will need to work even more closely together in the future, especially in view of the evolutionary nature of basel ii. and the committee has a full agenda ahead of it. we must, of course, continue to work on the specifics related to the implementation of the framework and its calibration. we must also ensure that the new framework keeps pace with market developments and advances in risk management practices. as we carry out this work, the committee intends to continue its discussions with the industry and other supervisors in the same open and transparent manner as we have to date. it has been an honour for me to participate in and help to lead this process