lorenzo bini smaghi : from tuscany ’ s 19th century currency, the fiorino, to the euro – dialogue on international finance speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, in the sala luca giordano at the palazzo medici riccardi, florence, 15 may 2008. * * * i ’ m very pleased to come back to florence to consider a highly topical subject linked to the effects of the financial turmoil on the world economy. to understand the current economic situation and the current short to medium - term prospects we need to take a step back and consider the imbalances that were building up on our continent until mid - 2007, imbalances that were evidently unsustainable and that underlie the corrections we are going through. we have to distinguish three main imbalances. in chronological order, the first one concerns international payments. over the years, the united states has accumulated huge deficits on its current account which have grown out of a lack of domestic savings. the us economy was essentially growing by borrowing from the rest of the world. in 2007 the us current account deficit amounted to over 6 % of its gdp. for years the problem of the sustainability of america ’ s external imbalance has been emphasised, especially in europe, which feared the risk of a disorderly unwinding with destabilising effects on the financial markets. the typical response from the other side of the atlantic to such fears was that in a globalised world these imbalances are physiological and do not cause problems so long as they are financed with capital inflows. moreover, the status of the dollar as sole international reserve currency used to guarantee such financing. in the end, the theory ( which in fact is no more than an accounting identity ) was put forward according to which america ’ s deficit was in reality the other side of the coin of an excess of savings in the developing countries, resulting inter alia from the fixed exchange rate policy vis - a - vis the dollar. the adjustment had therefore to start first of all from a modification of the policy of the other countries, rather than from the recovery of the savings capacity of american households. in synthesis, the prevailing theory up to recently was that the us imbalance was physiological and its correction, if any, would have implied no painful adjustment on the us economy. the second imbalance that has built up in recent years relates to the development of financial products

speech climate change and the financial sector speech by christine lagarde, president of the ecb, at the launch of the cop 26 private finance agenda london, 27 february 2020 climate change constitutes a major challenge, causing both threats and opportunities that will significantly affect the economy and the financial sector, depending on which carbon emission scenario eventually unfolds. that is why central banks need to devote greater attention to understanding the impact of climate change, including its implications for inflation dynamics. at the ecb, the ongoing review of our monetary policy strategy creates an opportunity to reflect on how to address sustainability considerations within our monetary policy framework. today, however, i will focus my remarks on climate change - related risks for the financial sector. broadly speaking, the main risks fall into three categories : risks stemming from disregard, from delay and from deficiency. risks from disregarding climate change disregarding the implications of climate change can generate significant risks for the financial sector. total insurance losses for weather - related events reached 0. 1 % of gdp in 2018, with total economic losses approximately double that amount. the number of catastrophes caused by natural hazards increased from 249 in 1980 to 820 in 2019, peaking at 848 in 2018. adjusting for inflation, overall economic losses increased from around usd 60 billion in 1980, to usd 150 billion in 2019, with a peak of usd 350 billion in 2018. according to the intergovernmental panel on climate change, global warming of 1. 5°c above preindustrial times is likely to bring about substantial changes in our climate, increasing the likelihood of more extreme weather conditions. as a result, insurance and economic losses caused by climate - related events are likely to start trending upwards as a share of gdp. insurance and reinsurance companies need to continue to ensure that risk pricing remains appropriate and that reserves are adequate to cover expected losses. banks also need to consider the risks such events create for their credit exposures. losses can arise from both direct damage and from the effects that potentially higher maintenance costs, disruption and lower labour productivity could have on profitability and hence default risk. risks from delaying the response to climate change the second source of risk for the financial sector arises from the pathway taken to a carbon - neutral world. achieving the transition almost certainly requires intervention by public authorities through regulation and taxation. early and coordinated action can help deliver a smooth transition for the economy. but if that intervention is delayed, the reduction in emissions may have to be sharper, resulting in a disorder