in 2050, in the event of a disorderly rather than orderly climate transition. 1. 2 for the smooth implementation of monetary policy climate risk is also a source of financial risk. it is therefore essential, as my colleague and friend jens weidmann, president of the bundesbank, says, that " central banks [ … ] practice what they preach " v for the banks they supervise, i. e. better factor climate risk into their own operations. moreover, preserving financial stability is a prerequisite for ensuring the smooth transmission of monetary policy, as the ngfs also recently recalled. vi let's face it : the ecb's balance sheet is " exposed " to climate risk through the securities it purchases and the assets pledged as collateral by banks, to an extent that is insufficiently taken into account. this is primarily due to the lack of comprehensive and standardised information that is needed for all economic agents to factor in climate risk. i will come back to this need for standardisation later. but more fundamentally, the difficulties in pricing climate risk are due to the very characteristics of these risks, and in particular to what we call " green swans ", which generate radical uncertainty and whose consequences can be systemic. vii in this respect, market neutrality – which guides the execution of our market operations – should not put a brake on carbon neutrality. viii market operations are conducted in a neutral manner as long as they comply with the central banks ’ risk control rules. and yet, climate risk is precisely a financial risk that is currently insufficiently measured by markets. ix another difficulty is often put forward, but it can be overcome : the fact that climate risk is long - term, while many of our risk measures are short - to medium - term. page 4 sur 8 this is a real technical challenge : the " probability of default " is usually one year ; our economic forecasts cover a two to three - year horizon. we must therefore work to " lengthen " our measures, but the fact that a " tragedy of the horizon x " exists is not a call for a status quo. on the contrary! climate change calls for early and resolute action as the benefits of corrective measures will essentially only be felt in the longer term. ii. how should the central bank intervene? how can this be concretely achieved? let me start by stressing a key point : the eurosystem's highly accommodative monetary policy is already helping to finance the

regarding the consequences of low rates for financial stability. it is important first to stress that the financial sector ’ s capacity to absorb shocks has been substantially reinforced since the great 2008 - 09 crisis : balance sheets have been cleaned up and bank solvency and liquidity have been improved thanks to the european and international regulations known as basel iii, and to a considerable reduction in the weight of non - performing loans. what is more, the effects of monetary policy include some positive aspectsxi that are all too often overlooked by the banks : lower financing costs ; a reduced cost of risk due to the improvement in borrower solvency. that said, while accommodative monetary policy is a benefit for economic agents, prolonging it puts pressure on the profitability of financial players – both banks and insurers alike. recognising this does not mean denouncing low rates : they have been put in place for the common good and not just for the benefit of banks or insurers. but recognising it means accepting the need to adapt : a solid financial sector in europe constitutes an asset. for insurers first, we support this urgent need for adaptation. low rates have a dual impact on them in that they lead to a revaluation of their commitments on the liability side – via a reduction in the discount rate – but also reduce the returns on their investments on the asset side. insurers therefore need to start reassessing in depth both their product offering and their positioning. similarly, for banks, the first part of this adaptation has to come from their own digitalisation and consolidation strategies. but part of it also falls to us : in september 2019 we decided to put in place a so - called “ tiering ” system, which will reduce the cost of negative rates this year by close to eur 4 billion for european banks, of which around eur 800 million will benefit french banks. we are pursuing a macroprudential policy to encourage banks to manage their page 12 of 14 risks prudently. this is the role of the haut conseil de stabilite financiere ( hcsf – high council for financial stability ), which since 2018 has put in place an additional countercyclical capital buffer ( ccyb ), and then in december 2019 introduced recommendations for real estate lending which, if necessary, will be transformed into binding rules. france is not unique in this respect as several european countries have already implemented macro