, insofar as this does not interfere with the eurosystem ’ s primary objective, which is price stability. indeed, in the eurosystem we have embarked upon a strategic revision of our monetary policy. as part of this we intend to reflect on the way in which we can incorporate climate risks and promote the sustainability of the economy. for this purpose, we need, first, to improve our understanding of the implications of climate change and economic policies designed to mitigate this phenomenon for the economy as a whole and, in particular, for price stability. the overriding aim should be to incorporate these implications into the economic analysis and forecasting tools on which the decision - making process is based. 16 in addition, climate risks ( both physical and counterparty risks ) may affect other elements of monetary policy instruments and operations. in these areas, the main objective of central banks should be to ensure, along with other public authorities, that markets correctly address climate risk. once this objective has been achieved, our monetary policy collateral policies would immediately lead to an adjustment in the amounts that counterparties can obtain. these and other considerations must be analysed in the eurosystem monetary policy strategy review. however, while this review is carried out, we in the governing council of the ecb are aware, to paraphrase president lagarde that trickles become oceans if cared for. in this respect, the banco de espana has already approved the incorporation of sustainability and responsibility criteria into its investment policy for the reserve portfolio it manages. as a result, and taking into account our mandate obligations, we are progressively increasing our holdings of green bonds and, for example, we are one of the founder members of the green investment fund set up by the bank for international settlements. conclusions in conclusion, the challenges associated with climate change require coordinated action, both at international level and at the level of the various different economic policies. allow me to stress that it is governments who have the legitimacy and are best prepared to lead the process of transformation to a more sustainable economy. thus, fiscal policy should play a leading role in this process, and also in the measures needed to mitigate the social costs of the transition. in any event, the importance of the financial sector in channelling the enormous funds needed to make the investments required by this transition and to identify the opportunities that may arise in this process is unquestionable. we supervisors and https : / / www. ecb. europa. eu / press / press

in order to avoid term mismatches in portfolios. a proper cushion needs to be kept by way of capital reserves against market exposure and capital size should set a limit for the risk exposure of an individual financial institution. apart from capital adequacy standards, the new international norms of banking regulation and supervision require a more proactive role for the regulator in enforcing an effective mechanism for evaluating, monitoring and managing risks in the financial system. this in turn would need stricter accounting, valuation and reporting norms on the part of banks. the basle core principles have also identified a number of challenging areas for regulators and supervisors, which must be satisfied to ensure orderly conduct of financial system and to promote its soundness and stability. transparency in banking operation is also something which has to receive top priority given the current nature of capital markets. transparency and accountability demand realistic valuation of assets, public disclosure norms and prudential reporting by banks to help depositors and investors form an informed opinion about the state of the financial system, thereby enabling them to react in an orderly fashion to asset price changes. moreover, public intervention policies in the form of explicit or implicit guarantees may have to be such that they do not lead to “ moral hazard ” in the form of undue risk - taking by banks and laxity in observing market disciplines. india must remain in the forefront of the movement for ensuring soundness of the banking system by adopting best practices and best international standards of performance and prudence. actions have already been initiated in this direction. the challenge now is to accelerate this process so that the banking and the financial system in our country can contribute to the sustained growth of the real economy with price stability. role of bank economists before i conclude, let me say a word about the role of bank economists in facilitating the reform process. this annual conference is a testimony to the economic talent that our banking system has developed over the years. almost all our banks have economic research departments or economic cells which are staffed by highly qualified economists with long experience in banking and the financial sector. the issue that i would like to pose before this conference is : are we making the best and most effective use of economists working in the banking sector to improve the functioning of banks, and for that matter, the operational efficiency of the financial sector as a whole? in commercial organisations like banks, economics departments have the advantage of not being excessively burdened with day - to - day problems of running the banks or ensuring the safety and profitability of individual