launch of the ngfs conceptual framework “ to guide action by central banks and supervisors on nature - related risks ” – paris, 7 september 2023 speech by francois villeroy de galhau, governor of the banque de france page 1 sur 5 ladies and gentlemen, it is a great pleasure to introduce, together with dnb ’ s president klaas knot, this ngfs conference that launches its conceptual framework on nature - related risks. one year ago, we were together in amsterdam for a pioneering conference on biodiversity from a central bank and supervisor perspective. at the time, our grasping of nature - related risks was roughly the same as on climate change some years earlier, and we acknowledged the need to refine our understanding and methodology. indeed, our economic reliance on natural resources such as wateri, and more broadly on services provided by nature and, at the same time, the impact our economies have on nature, are becoming more and more obvious and are increasingly documented. as ravi menon, chair of the ngfs, stressed it recently, “ along with the climate crisis, the nature crisis is the existential challenge of our times. we cannot focus on one and hope the other will take care of itself. ” ii the new conceptual framework released today by the ngfs therefore marks an important milestone. it offers a shared language and sketches out a common method to assess nature - related financial risks and ensure that our collective work is both consistent and joined up. the common understanding we have reached together is both science - based and geared toward bridging the gap with assessing the economic and financial implications of nature - related risks. as frank elderson recently put it, “ this is not some kind of a flower power, treehugging exercise. this is core economics. ” iii according to one estimate, reversing the decline in nature loss could require approximately 500 billion dollars per year until 2030, while the world currently spends less than 150 billion dollars on nature conservation and harmful subsidies represent 300 billion dollarsiv. whatever the right figures, the gap is such that it is all the more important that financial actors start acting on nature - related risks to shift nature - blind financial flows. at banque de france, we have started doing so through our sustainable investment policy by partnering with a data provider to page 2 sur 5 carry out a detailed assessment of impact on biodiversity of the equity and corporate bond components of our non - monetary portfolios. as you can see, the impact of our equity portfolios

their new freedoms well - in particular if they do not develop the credit skills and risk management techniques which are required in the kind of lending boom that may develop after deregulation. 17. the pressures on the existing banks is increased if liberalization also allows new entrants into the market. competition in some asian economies has already intensified as a result of the granting of new domestic banking licences and more liberal policies on the admission of foreign banks. the need to meet wto obligations will give further impetus to this process. but while the long - term impact on the efficiency of the banking system may be favourable, the short - term impact can be to narrow interest margins and erode franchise value. this can drive the local banks to take on more high risk business. 18. i should stress, however, that the answer to this dilemma is not to stop or reverse the process of deregulation. there are examples around the region of bad debt problems embedded in banks which are either owned by the government or, even if they are privately owned, have been granting policy loans on behalf of the government. such banks should be encouraged to develop their own credit judgment in order to play an effective role in the process of credit allocation in the economy. so liberalization is the right approach. it must, however, be properly handled if the problems of the banking sector are not to intensify during the transition to a more commercialized system. in particular, the supervisory framework should be strengthened in advance of liberalization. maintenance of asset quality 19. let me turn to the challenge of the maintenance of asset quality. this applies across a wide spectrum in asia from banks that are emerging from tight state control to those that operate on a fully commercial basis. a particular focus of concern, as i have already indicated, is that banks in some economies may have lent too freely to booming property sectors which are now suffering from over - supply. it remains to be seen whether the fears will be realized. a number of supervisory authorities around the region have tried to take measures to limit their banks ’ exposure to the property sector. this is a sensible move, though the difficulties of enforcing limits should not be underestimated. 20. however, property lending is not the only problem area. in korea, for example, the slowdown in export demand in industries such as semiconductors and in economic growth has exposed fragility in those companies which have over - extended themselves by taking on too much debt. banks which have become