François Villeroy de Galhau: Central banks’ response to the “tragedy on the horizon” Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the SUERF – Online Conference, 14 October 2020. * * * Ladies and Gentlemen, I am very happy to join you today for this discussion that, although virtual, will be very real in terms of the strength of the ideas put forward. I am grateful to Michala Marcussen for offering me the opportunity to give this speech on such a dense topic: central banks’ response to the “tragedy on the horizon”. Faced with an unpredictable shock, the past eight months have driven the global economy into uncharted territory. However, one danger is certainly looming larger at the moment : our lasting addiction to public debt. Let me be clear: in the face of the unprecedented covid-shock, a massive and one-off recourse to public debt financing was both inevitable and desirable. However, we have entered this crisis with public debt levels, which were already very high in most countries, with few notable exceptions. The continuous rise of public debt, along with climate change, represent two of the main long-run challenges that we face today. In his famous 2015 speech, Mark Carney spoke of climate change as the “tragedy of the horizon”. With this, he meant that this tragedy is inevitable if we do not act, but it is in the long term, possibly leading to a “status quo bias”.
Let us instead develop a coherent and integrated system that relies upon the classical elements of defense, but none of them exclusively: perimeter security to keep the adversary outside of the environment; defense in depth to safeguard our most critical assets; sophisticated intelligence to understand the adversary’s tactics; robust surveillance to monitor for intrusion and ensure environmental integrity; rapid response to fend off attack; effective collaboration with allies to enhance information sharing and collective security; and a strategic reserve to respond deftly in the event of loss. Make no mistake: as it relates to the wholesale services of the Federal Reserve Banks, we aspire not merely to a commercial standard of resiliency, or even a supervisory standard, but something approaching national security grade. We proceed on this trajectory from a position of strength, reflecting a record of experience that has endured the most severe terror attack in our nation’s history, a financial crisis of historic proportion, and an array of extreme weather events. But in this sphere, either intentionally we are progressing, or inevitably we are regressing: there is no idleness. Thank you for your generous attention today. I’d be pleased to respond to a few questions. 5/5  BIS central bankers' speeches