. we should examine carefully the impact of these proposals on two areas, namely trade finance and sme finance. this is of particular significance for emerging economies. • across much of emerging asia, where capital markets are relatively undeveloped, banks are a major source of funding for trade and smes. • trade and smes are major engines of growth in many emerging market economies. let me start with trade financing. • being short - term and self - liquidating in nature, trade financing is probably one of the safer forms of bank lending. • but the proposal to move bank exposures completely to the revised standardised approach could result in imposing significantly higher capital requirements for trade finance, more punitive than justifiable by its historical losses. bis central bankers ’ speeches • while the availability and cost of trade finance have so far held up well in the face of basel iii implementation, the latest set of proposals could have the effect of discouraging banks from trade financing. • this is not what we need at a time when trade is growing more slowly than income in many parts of the world. second, sme financing. • i would say we are broadly on the right track. • while sme loans tend to be riskier on a standalone basis, as a portfolio the risks are more diversified than loans to larger corporates. • the basel committee recognises this and the current capital framework provides for preferential capital treatment for exposures to smes for banks using internal models. • and the basel committee has further proposed applying a lower risk weight for banks ’ sme exposures compared to unrated corporate exposures under the revised standardised approach. this will help alleviate the cost of sme financing. conclusion let me summarise my main points. we have made good progress in bank regulation since the crisis. • implementation has been generally good but some areas need more work and some jurisdictions need to close the gaps. • overall, the reforms have helped to make banks safer and more resilient. as we finalise the basel iii capital reforms, we must ensure that banks are not only safe but also serve their purpose of supporting the economy. • we should be mindful of the effects of low profitability on banks ’ ability and willingness to lend. • we should be mindful not to increase significantly the overall level of capital requirements on banks even as we finetune the detailed capital rules. • and we should be mindful not to unduly penalise lending to important segments of

fout! onbekende naam voor documenteigenschap. practices that we have found and we hope that it will help other supervisors to implement these best practices and hence — via the leverage that membership has — it will have an effect on banks and insurance undertakings all around the world. secondly, this work is spearheaded by the bank of england, the ngfs focuses on climate - related stress testing, developing reference climate policy scenarios for central banks and supervisors and giving guidance for central banks and supervisors on how to integrate climate risk analyses into macroeconomic and financial stability surveillance, seizing the macro financial impact of these risks. as climate - related risks are nonlinear, will to a large extend manifest themselves in the future and can therefore not be based on historical data, we need to develop forward looking risk management techniques. the third piece focuses on data gaps and disclosures. wrapping up, in the run up to cop26, i really want to applaud the cop26 for making the very explicit connection with the financial sector, given the crucial importance of managing financial risks. i want to offer that the ngfs stands ready to do all we can to contribute. second, i want to point out the great importance of any financial institution which is not already doing so, to incorporate in the dna of their financial risk management, the physical and transition risks related to climate change, and even broader to environmental change, biodiversity change, sdg - related change. any financial institution should make sure it has this long - term view and incorporate it into risk management. coming back to the pandemic. people are dying because of the pandemic. the planet is perishing because of unwise policies from us, the people. there is a public health crisis, but there is also a planet health crisis. the planet also needs intensive care. this is the time to apply the lessons drawn from our past mistakes. this is the time to turn the page, this is the time to invest once and for all in a truly sustainable economy. in these dark days of the pandemic, we must create an avenue of hope, we must switch on the light. let that light be green.