2 % when there are no local banks operating in a fire - hit region, whereas it remains unchanged when local institutions take an active ro le in lending. 9 see oecd ( 20 23 ). " taming wildfires in the co ntext o f climate change ”. oecd publishing, paris. 10 see euro pean co mmission, joint research centre, hugo co sta, daniele de rigo, giorgio liberta, tracy ho uston durrant and jesus san - miguel - ayanz ( 2020 ). " euro pean wildfire danger and vulnerability in a changing climate : to wards integrating risk dimensions : jrc peseta iv pro ject : task 9 - fo rest fires ”. publicatio ns office o f the euro pean union. 11 alvarez - ro man, laura, sergio mayo rdo mo, carles vergara - alert and xavier vives ( 2024 ). “ climate risk, so ft info rmation, and credit supply ”. banco de espana, wo rking paper. 12 also, because lo cal banks have better access to qualitative data, they can reduce their lending to firms to a lesser extent witho ut incurring greater risk. fourth, flooding is another type of extreme weather event that can pose physical risks. according to a granular analysis 13 conducted by the banco de espana, 1. 3 % of the residential properties used as mortgage collateral in spain are located in areas at risk of flooding within the next 10 years. over longer time horizons ( 50 and 500 years ), this proportion rises to 2. 7 % and 7. 7 %, respectively. 14 overall, this analysis therefore suggests that the banking sector ’ s mortgage portfolio currently has limited exposure to flood risks. however, the frequency of such events and the size of flood - prone areas could increase in the future if nothing is done to prevent climate change. in any event, further work is needed to improve the available databases and to continue researching, inter alia, the extent to which property appraisals already capture flood risks or if, alternatively, there is a risk that appraisal values might suddenly change were such events to occur, and the role of insurers. fifth, severe environmental degradation can also have adverse economic and financial impacts through various channels, including, again, the value of real estate collateral. we already have evidence of these kinds of effects in spain.

not forget the role that so - called “ macroprudential policy ” can and should play. the introduction of macroprudential instruments to complement the stabilising capacity of monetary and fiscal policies is probably one of the most significant advances in the wake of the international financial crisis. for the countries belonging to a monetary union, the introduction of these tools is particularly important. this is because it is one of the few instruments available nationally to ensure the stability of the domestic financial system. in my opinion, macroprudential policy has a dual role to play in the current setting. first, continuing low or even negative interest rates over an extended period may have adverse effects on financial stability. macroprudential policy should be primarily entrusted with reacting if some of these risks emerge, actively combating potential excessive debt growth and protecting financial institutions against the hypothetical materialisation of these see chapter 4, “ fiscal policy in the euro area ”, in the annual report 2016, banco de espana. see arce et al. ( 2016 ), “ policy spillovers and synergies in a monetary union ”, international journal of central banking, 12 ( 3 ), september, pp. 219 - 277. see chapter 4, “ fiscal policy in the euro area ”, in the annual report 2016, banco de espana. 12 / 16 risks. this policy action should affect both the banking sector and the non - bank financial sector, depending on where the signs of exuberance are perceived. second, some macroprudential instruments, such as the countercyclical capital buffer ( ccyb ), can be used to build up capital buffers at financial institutions in times of plenty that can be deployed when conditions worsen. the use of macroeconomic stabilisation mechanisms, such as the ccyb, is particularly significant in a setting, such as the present one, in which monetary policy scope is more limited. 15 structural reforms conducive to raising potential growth must be undertaken it is also imperative to address the structural shortcomings hampering productivity and the generation and harnessing of investment opportunities in the euro area. at the same time, measures should be introduced geared to making all citizens party to the benefits the european project entails. these structural reforms, insofar as they are expansionary supply - side policies, are especially appropriate in the international setting i have described, in which the main growth shocks and risks ( such as protectionist tensions and the uncertainty surrounding brex