marja nykanen : opening remarks speech by ms marja nykanen, deputy governor of the bank of finland, at the conference on systemic risk analytics, 1 july 2021. * * * ladies and gentlemen, on behalf of the bank of finland and other organisers of this conference i would like to welcome you all to this year ’ s conference on systemic risk analytics. despite the ongoing covid - 19 pandemic, we have been fortunate to receive several excellent papers this year. a big thanks to the organising team for making this conference happen and to everyone who submitted their papers – without your efforts this conference would have not been possible. the focus in financial analysis is changing from looking at issues in the rear - view mirror towards a more forward - looking approach. in my opinion, it is important that we find the right balance between the two. it is important to learn from the past, but it is equally important to prepare for the future. this will be a central theme throughout the conference. in this opening speech i will be highlighting two challenges that we have in financial analysis related to climate change, and i will propose two solutions. but these are general issues and relevant not only in the case of climate change ; instead, they exemplify the challenges that we also face in many other fields. the first challenge is that financial analysis related to climate change is a relatively new topic in our field. this means that the analytical methodologies and relevant data are still in their infancy. the first lessons learned in this process have been that traditional methodologies and data are inadequate for financial stability analysis related to climate change. climate change is not evident in past data ; instead, we need data to cover the future. similarly, we require information beyond financial disclosures. and in many cases, comparable and reliable data does not even exist. the same goes for analytical methods. climate change needs forward - looking approaches with a time horizon in the range of several decades instead of a couple of years. our financial models need to be complemented with non - financial information. what are known as integrated assessment models, thus far used in much of financial climate analysis, are a good start. but to really make progress, we may need to be able to integrate the climate into the traditional central bank forecasting models to make climate issues more relevant to macroeconomic analysis. the second challenge is a lack of expertise. the relevant analytical knowhow is rare, as this topic has not been included in the mainstream economics or

the exchange rate mechanism of the eu, for at least two years, and third, after the sustainable fulfilment of all the convergence criteria laid down in the treaty, the new member states will adopt the euro. throughout the process leading to the introduction of the euro, the new member states'economic situations and their policy strategies will have to be assessed on a case - by - case basis. the role of erm ii in this process, first, is to help participating member states orient their policies to stability and to foster economic convergence. second, participation in erm ii without severe tensions for at least two years is one of the convergence criteria. finally, entry into the euro area will be based on the sustainable fulfilment of the maastricht convergence criteria. these criteria will be applied to future euro area entrants in the same way they applied to euro area countries. it may take quite a while before new member states will be in a position to fully participate in emu. a fair share of realism is called for to avoid disappointment. in the long run, such an equitable and strict procedure will be to the advantage of all member states of the european union. in concluding, i would like to reiterate that in many respects, the euro has proved to be a driving force for europe's continued political integration and economic reforms. the euro is regarded as an important token of identity for a modern, dynamic and open europe. the euro provides a stable anchor in unfortunately not so stable times. but the euro can only shield us from external shocks within limits. even though the euro has already triggered considerable fiscal and structural reforms, we must not relinquish our endeavors to make the euro area economy more efficient and productive.