and the “ status quo ” in an ever - changing financial system. i will stop here saying that i believe financial stability should always look towards the future. in this direction, significant progress has been made recently through the development of environmental, social and governance – or esg – investing. in this new paradigm, policy makers should first and foremost learn to assess and monitor new types of risks, such as climate change, and evaluate their growing impact on financial sector stability. in an open letter published three weeks ago on climate - related financial risks from the governor of bank of england mark carney, governor of banque de france francois villeroy de galhau and chair of the network for greening the financial services frank elderson, the significant effects of climate change are highlighted and a call for action from central banks and supervision is issued, with specific recommendations where central banks are encouraged to integrate sustainability into their own portfolio management. in closing, the authors recognize that “ climate change is a global problem, which requires global solutions, in which the whole financial sector has a crucial role to play ”. today we have unlocked the gates towards exotic, yet newsworthy debates here, in bucharest. therefore, permit me to extend an open invitation to you all for further discussions at the national bank of romania about the impact of climate changes on economies, finance and central banking. we will be honored to host such a conference in bucharest. thank you for your attention. 2 / 2 bis central bankers'speeches

give themselves a margin of error. such buffers could reduce as banks become better at controlling their proportion of high lvr lending. within the speed limit, each bank would make their own assessment of which customers received high lvr loans, based on their own criteria including other risk measures, such as debt servicing capacity, and the potential long - term value of those customers to the bank. exemptions a number of submissions to the recent consultation have proposed targeting particular borrower segments. our preference is to keep the policy simple and effective by not having major exemptions and by minimising the possibilities for avoidance. if for example there was a carve - out for small businesses, the potential for avoidance would increase markedly as individual borrowers set up companies for borrowing purposes. categories where there is a clear case to exempt include housing new zealand mortgageinsured loans, bridging loans, refinancing loans and high - lvr loans to borrowers who are moving home ( but not increasing their lvr or loan amount ). unintended consequences while we believe that lvr restrictions could have significant benefits in terms of reducing systemic risk in the housing market, they are not a panacea. we recognise there would be costs and unintended consequences. most obviously there would be implementation costs. banks will need to change systems and policies, and train staff to implement lvr bis central bankers ’ speeches restrictions. more substantially, there will be system - wide efficiency costs arising from borrowers and lenders seeking to avoid lvr restrictions. the most obvious channel for avoidance is family loans, which could become more prevalent as a means of reducing the amount of bank finance utilised by first - home buyers. that is a family ’ s prerogative and there is nothing the reserve bank could or should do about it. alternative channels could include unsecured top - up loans or high lvr mortgages from non - bank housing lenders. such disintermediation will tend to be greater, the longer that any restrictions remain in place. if it becomes widespread, then efficiency costs could become significant at the same time as the effectiveness of the policy is reduced. if avoidance activity is so prevalent as to undermine the effect of the lvr policy then either the lvr restriction could be removed or the lvr policy could be applied more broadly and / or more rigorously. for example, following the introduction of lvr restrictions in 2002, the korean authorities expanded the regulatory perimeter in 2006 beyond banks