Only in this way will they be capable of incorporating into the prices of their products and services the risks associated with climate change and, thus, helping to drive the process. As in any process of structural change, it is not sufficient to identify the investments that are going to have to be made, but also the opportunities that will doubtless arise. Here, it is worth highlighting that the exposure of Spanish banks to the activities potentially most affected by climate transition risks represents around 20% of their total exposure to productive activity. Following the international financial crisis, these exposures saw a smaller increase in default rates than the rest of the economy, even when those activities at the epicentre of the crisis – construction and real estate activity – are excluded. Moreover, these default rates have now returned to their pre-crisis levels, while in other activities they have not.13 However, our analysis suggests the lower realised risk of those activities more exposed to transition risks is, above all, a consequence of the fact that these activities are more profitable than those of the economy as a whole. However, in a scenario of internalised such costs, this profitability advantage and, therefore, the risk differential would practically disappear. This needs to be taken into account by financial institutions when they take their decisions.
Thomas Jordan: Monetary policy and the business cycle Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the 75th anniversary celebrations of the KOF Swiss Economic Institute, Zurich, 23 September 2013. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Monetary policy contributes to the prosperity of an economy by ensuring price stability in the medium and long term. This makes it possible to put resources to more efficient use, from an economic point of view, and also promotes investment and, with it, long-term growth. Price stability also helps to avoid undesirable distribution effects. Households with lower incomes derive particular benefit from this. Monetary policy can be used to dampen cyclical fluctuations. However, it is not suitable for short-term fine-tuning of the economy. From the point of view of the business cycle, the goal of monetary policy must rather be the reduction of larger risks and the alleviation of extreme situations. An example of one such measure is the minimum exchange rate, which the Swiss National Bank (SNB) set on 6 September 2011 to halt the Swiss franc's upward trend, thus averting a deflationary spiral and warding off the danger of a serious economic crisis. Monetary policy decisions are always subject to uncertainty. It is therefore of key importance that the SNB has a sound decision-making basis.