[13] This presents a challenge when considering implications for policy – and highlights the importance of continuing to plug the kinds of capability gaps I discussed earlier. As the results publication sets out, the Bank will engage with firms individually and collectively to help them target their efforts, and share good practices identified in this exercise. Implications for policy I hope it’s clear by this point that the CBES will be a valuable tool for helping us and financial firms to understand the challenges ahead. This exercise is not going to be used to set capital requirements for banks and insurers. But it clearly sheds light on that debate. The CBES results make clear that climate risk is a first-order strategic issue for the firms we regulate. But in my view it is not yet clear that the magnitude of transition costs require a fundamental recalibration of capital requirements for the system. [14] A persistent drag on profitability would be very nasty for firms, but so long as they are able to continue to make sufficient profits to maintain their capital buffers, its impact on safety and soundness might be less material. Had the results of this exercise suggested a fundamental threat to the solvency of these firms, our response would of course have been quite different. Set against that high level view, though, a world with climate change is without doubt riskier than one without.
Philipp Hildebrand: SNB’s performance against the background of financial market developments Introductory remarks by Dr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 15 December 2005. *  *  *  Developments in the financial markets The international financial markets have been dominated in recent months by four key developments. Long-term capital market yields have improved; the equity markets have, on the whole, exhibited very positive developments; the US dollar has continued the uptrend which set in at the beginning of this year; and the gold price has climbed sharply. The movements of the past few months in the international capital markets are largely attributable to economic developments and US monetary policy. Long-term dollar interest rates climbed significantly in the second half of the year thanks to the robust economic climate, the positive outlook in the US and the continued normalisation of monetary policy by the Federal Reserve. A rise in yields was also observed outside the US. The spread between US and European capital market rates, however, remained considerable. This is not least reflected in the differing business cycle phases of the US and European economies. Despite the improved economic outlook and higher oil prices, inflation expectations have, on the whole, remained moderate on both sides of the Atlantic. The three major economic areas – US, Japan and Europe – exhibited divergent equity market developments. While the US equity market largely maintained its sideways trend, the European indices firmed substantially.