##s that may embed opaque, concentrated climate - related risks. sudden realizations of climate - related risks could cause rapid shifts in investor sentiment and shocks to asset prices, including to real estate prices in specific geographic locations. 15 federal, state, and local authorities are implementing policies to support transparency in climate - related risk associated with real estate to allow property owners, lenders, and investors to make better - informed investment decisions. updated flood maps, coastal resilience programs, and managed retreat from flood - prone areas can see, for example, christopher flavelle ( 2019 ), “ as wildfires get worse, insurers pull back from riskiest areas, ” new york times, august 20 ; and matt sheehan ( 2020 ), “ renre could pull back in florida if rates stay low, says ceo, ” reinsurance news, february 7. the federal housing finance authority recently issued a request for input on natural disaster risk to the housing finance system ; see federal housing finance agency ( 2021 ), “ fhfa issues rfi on climate and natural disaster risk management at the regulated entities, ” news release, january 19, https : / / www. fhfa. gov / media / publicaffairs / pages / fhfa - issues - rfi - on - climate - and - natural - disasterrisk - management - at - the - regulated - entities. aspx. - 8reduce the extent of hidden climate risks. while such transparency is vital, financial system vulnerabilities could arise even in transparent markets — for example, through aggregate common exposures to climate risk. finally, climate - related physical risks are increasing financial burdens on local, state, and federal finances. increasing physical damage to localities necessitates higher expenditures to repair damage from extreme weather and fire events and to build resilience to growing climate threats. pullbacks in insurance coverage, the need to relocate or bolster infrastructure, and increased provision of service in the wake of disasters increase burdens on state, local, and federal finances. these rising burdens could place strains on municipal financing markets over time, particularly in areas of geographically concentrated climate risks, and create some risk of a cascade effect if a shock causes investors to pull back from similar exposures. new approaches and new tools we are building the requisite institutional capacity and knowledge to deepen our understanding of these risks and vulnerabilities. the new fscc is a systemwide committee

criteria and obtain credit. mature smes face declined uncertainty in their operations. with sufficient credit records and relatively transparent information, creditors and investors are in a better position to grasp internal information of these smes, and the smes have the capacity to provide sufficient collateral. in this context, these enterprises usually are quality customers that financial institutions compete for. their loans would grow rapidly. the most successful smes may become large enterprises, thus being able to access direct financing. these enterprises may raise funds by issuing bonds or stock shares, thus facing little constraints in obtaining financing. smes are a big group of customers. to differentiate among smes and corresponding financing channels could actually enhance the allocation of social resources. the central bank shall provide credit guidance for commercial banks from a more macro perspective. in this process, commercial banks shall strengthen loan management, enhance its efficiency, and discover and foster potential customers. with the rapid development of the financial market, the direct financing channel of large enterprises would be further explored, and its share increased. commercial banks will face challenge in terms of their customer structure. hence, it is urgent for commercial banks to discover and foster stable customers from the bunch of smes. credit market and capital market mainly differ in the fact that there is a one - to - one negotiation between commercial banks and their customers. hence, commercial banks are in a better position to get management information, make judgment on risks and price the loans. therefore, commercial banks can tailor their products for smes according to their financing needs at various stages. meanwhile, commercial banks shall have a long vision to explore the potential of customers and help smes quickly transit from starting stage towards mature stage. ii. appropriately price lending risks with smes lending rate is actually the price of credit products. the pricing of credit products mainly includes cost of capital and risk premium. the pricing capacity of chinese financial institutions is generally weak. one reason is that there have been many administrative restrictions where many prices were determined by the government. financial institutions had no pricing power and no experience to autonomously determine the price. moreover, financial institutions had no incentive to make autonomous pricing duce to the institutional weaknesses. chronically, there has been a perception that we shall provide preferential interest rate for the industries and areas we would support. in general, banks ’ lending to large customers is like wholesale business and that to smes is retail. loans to smes are usually featured by small amount, many batches and sophisticated procedures. according to a survey