##ilient. in march, the fpc recommended that banks ’ capital should be assessed using more prudent estimates of expected losses and risk weights. since april, the board of the pra has been making those assessments and asking banks to take action to deal with any shortfall of capital. that work is now complete, the banks know the results, and tomorrow we will publish them for each of the major banks. in total, the eight largest banks have a capital shortfall of around £25bn relative to the standard recommended by the fpc. after this exercise, our major banks all now have plans for actions to fill that shortfall. the first evidence is the announcement on as measured by the rate of increase in the gdp deflator. bis central bankers ’ speeches monday by the co - operative bank. others will follow. by taking firm pre - emptive action, we have shown what the new judgement - led approach to supervision means in practice. it substitutes substance for process and judgement for box - ticking. we need not more but better regulation and, just as with monetary policy, we have changed the way regulatory decisions are made. the pra announcement tomorrow is another step in dealing with the legacy of the past. it will make our banking system more resilient and better able to support recovery. but it is too soon to say that the job is done. many of our major lenders will still be highly levered. the levels of capital required by the vickers reforms, on the one hand, and the basel standards for large international banks, on the other, mean that there is clearly some way to go before we can claim to have a really well - capitalised banking system. in future, the fpc and the pra will work together to conduct regular stress tests of our banks, starting in 2014. those stress tests will i am sure be made public, and banks will be expected to set out their plans for making up any identified shortfall in capital. managing this process, and the transition to a higher level of capital, will be key tasks for the fpc and pra in the coming years. those who argue that requiring higher levels of capital will necessarily restrict lending are wrong. the reverse is true. it is insufficient capital that restricts lending. that is why some of our weaker banks are shrinking their balance sheets. capital supports lending and provides resilience. and, without a resilient banking system, it will be difficult to sustain a recovery

also know that change is coming and that we can strengthen areas of vulnerability though adaptation, and through integrated, multidisciplinary thinking. and, as i have argued before, our macroeconomic framework needs a greater intergenerational focus. 21 no doubt there are many things we don ’ t know and we have to continue to rely on science to help us map out the journey. but it ’ s a journey we have to travel albeit that it will likely be, to paraphrase the greek poet cavafy, “ full of adventure, full of discovery ”, an achievable and worthwhile journey and “ arriving there [ should be what we ’ re ] destined for ”. 22 [ 1 ] my thanks to james carroll and fiona woods for their contribution to my remarks. [ 2 ] https : / / www. unep. org / interactives / emissions - gap - report / 2023 / # section _ - 1 [ 3 ] figures directly supplied to central bank staff from cso [ 4 ] see https : / / www. centralbank. ie / docs / default - source / publications / financial - stability - notes / climate - risks - in - the - financialsystem. pdf for discussion on climate - economy - financial linkages [ 5 ] https : / / edgar. jrc. ec. europa. eu / report _ 2023 [ 6 ] https : / / gml. noaa. gov / ccgg / trends / data. html [ 7 ] https : / / www. ft. com / content / 8927424e - 2828 - 4414 - 86b7 - f3a991214288 [ 8 ] https : / / wmo. int / publication - series / atlas - of - mortality - and - economic - losses - from - weather - climate - and - water - relatedhazards - 1970 - 2021 [ 9 ] https : / / climate. copernicus. eu / widespread - floods - severe - heatwaves - esotc - 2023 - puts - europes - climate - focus [ 10 ] https : / / www. iea. org / reports / co2 - emissions - in - 2023 [ 11 ] https : / / www. esri. ie / system / files? file = media / file - uploads / 2015 - 07 / wp246. pdf [ 12 ] https : / / www