These often stem from sensitivity to fast swings in capital flows, and break out when economic policy lacks credibility. They can also be caused by a combination of domestic problems and contagion from other countries that are considered to be in similar economic situations. At the same time as the free movement of capital increases the potential welfare effects of globalisation, it entails risks that can only be managed through disciplined economic policy. IMF financing for capital account crises should principally aim to quickly restore confidence in the affected countries’ economic policies. The intention should be that the loans be paid back to the IMF after a relatively short period of time. When a serious crisis is at hand, it is hard to say no to a loan request. At the same time, it is important to counter tendencies towards moral hazard, which in the longer term could result in both riskier economic policies and irresponsible lending from private creditors. This is a genuinely difficult issue. There are no easy solutions. The Nordic-Baltic constituency has argued that the use of the IMF's loan instrument must be based on unambiguous, predictable rules. And that the rules be applied. This has not always been the case, e.g. as regards certain decisions concerning exceptional access, i.e. where the IMF has granted substantial loans without requiring sufficient conditionality. In a number of instances the result has been a longer-term dependence on loans and in several cases recurrent crises as well.
Integrating sustainability factors into own-portfolio management Central banks must send the right signal and lead by example in their investment and disclosure policies. The DNB has signed up to the UN Principles for Responsible Investment. Norges Bank, which manages the Norwegian sovereign wealth fund, has advocated a diversification of the portfolio and is implementing a divestment strategy dedicated to selling off some oil and gas stocks. We, at the Banque de France, adopted in March last year a Charter on Responsible Investment for the management of our own funds and our pension portfolios: this means allocating them to socially and environmentally responsible investment funds. With respect to disclosure, in March 2019 we were the first central bank to publish our climate-related risks’ exposures. We are also working to further align our reporting with a TCFD-like approach that would fit the specificities of central banks. We trust our experience will be useful to the NGFS membership in defining some best practices as far ESG investment for central banks is concerned. We can be proud of what we have achieved in 16 months, but it is “time to roll up our sleeves”: the merciless perspective of a more than 2°C world requires us to strive to do better and to do it now. Developing practical solutions now tops the agenda of the NGFS “Season 2”. II. The road ahead for central banks/supervisors and other players too a. Disclosures and taxonomies, two faces of the same coin We are currently facing a chicken and egg dilemma.