a return to the boom. many people say that we need more “ confidence ” in the economy among both households and businesses. we do, but it has to be the right sort of confidence. the kind of confidence based on nothing more than expectations of ever - increasing housing prices, with the associated willingness to continue increasing leverage, on the assumption that this is a sure way to wealth, would not be the right kind. unfortunately, we have been rather too prone to that misplaced optimism on occasion. you don ’ t have to be a believer in bubbles to think that a return to sizeable price increases and higher household gearing from still reasonably high current levels would be a risky approach. it would surely be a false basis for confidence. the intended effect of recent policy actions is certainly not to pump up speculative demand for assets. 6 as it happens, our judgement is that the risk of re - igniting a boom in borrowing and prices is not very high, and this was a key consideration in decisions to lower interest rates over the past eight months. hence, i do not think we should set monetary policy to foster a renewed gearing up by households. we can help, at the margin, the process of borrowers getting their balance sheets into better shape. to the extent that softer demand conditions have resulted from as in 2009, the challenge is “ how to ensure that the ready availability and low cost of housing finance is translated into more dwellings, not just higher prices ”. see stevens, g, “ challenges for economic policy ”, address to the anika foundation luncheon, sydney, 28 july 2009. bis central bankers ’ speeches households or some businesses restraining spending in an effort to get debt down, and this leads to lower inflation, our inflation targeting framework tells us to ease monetary policy. that is what we have been doing. the reduction in interest rates over the past eight months or so – 125 basis points on the cash rate and something less than that, but still quite a significant fall, in the structure of intermediaries ’ lending rates – will speed up, at the margin, the process of deleveraging for those who need or want to undertake it. in saying that, of course, we cannot neglect the interests of those who live off the return from their savings and who rightly expect us to preserve the real value of those savings. popular discussion of interest rates routinely ignores this element, focusing almost exclusively on the minority of the population – just over one - third – who

to our financial stability mandate, banks are significantly exposed to high - carbon and other vulnerable companies through loans and bond purchases, which makes them exposed to transition risk. as supervisors, it falls upon us to encourage and direct banks to identify and measure climate related risks and, above all, to manage them efficiently. to facilitate this process we issued supervisory expectations already in 2020 that banks should meet by the end of this year. and in 2022, we conducted the first supervisory climate stress tests for the banking sector at the euro area level. they showed that banks have made visible progress in meeting the expectations, but also revealed a number of gaps. environmental considerations are increasingly becoming part of our annual supervisory review and evaluation process, which can ultimately affect the capital requirements we set. regarding the role of macroprudential policy, especially the possibility to set higher capital buffer requirements for exposures to carbon - intensive companies, remains a subject of ongoing debate. more details on our activities are available in the newly published medium - term climate plan of banka slovenije. ladies and gentlemen, investments made today will shape our future. with the set of activities i have presented, central banks help motivate banks to steer their financing towards greener projects. in recent years, banks in slovenia and in the euro area have increased the extent of green financial products. at the moment, these are still mainly intended for households, and their volume represents a limited share of all bank loans. within the overall green finance market, they play much smaller role than esg funds and climate and sustainability bonds. but we all aware that policy measures, which have already been adopted, need time to be fully implemented and deliver results. and new ones will eventually be added. that is why i remain optimistic that the measures we have introduced recently will help to shape the framework, which will enable us to respond to new challenges thank you for the opportunity to join you today and be part of that process. 2 / 3 bis - central bankers'speeches 3 / 3 bis - central bankers'speeches