17.03.2021  The Role of Central Banks and Banking Supervisors in Climate Action Opening remarks. Resilience of the financial system to natural disasters, IESE online conference Pablo Hernández de Cos Governor  Ladies and Gentlemen, Let me first thank Professor Xavier Vives for inviting me to this conference on the “Resilience of the financial system to natural disasters”, organised by the IESE. It is a pleasure for me to open the conference. I am sure the final version of your forthcoming report1 will benefit from the views of such distinguished members of academia that are today with us. And I am certain they will provide us with much food for thought, ultimately benefiting the joint efforts to address the risks associated with climate change. This topic has, in recent years, come to the fore of the concerns of the overall financial sector, including firms, supervisors and central banks. Let me offer some brief remarks on this topic, starting with the impact of climate-related risk on the financial sector and the role of regulators and supervisors, and followed by the connection between climate change and the conduct of monetary policy. Climate-related risk for the financial sector and the role of regulators and supervisors Across the studies measuring the impact of the various industries and sectors on climate change, the financial sector is usually classified among the environmentally friendly branches of activity.
In this context, we also welcome the ongoing work by international organisations, including the IMF and World Bank, on the design of efficient and effective insolvency regimes worldwide. It is, of course, difficult to establish international standards in this area, because the approaches adopted by different countries reflect not only different legal traditions but also different policy choices, most especially on the extent to which the system should favour debtors or creditors. Indeed, this is a debate that is live in several countries, including the UK where new measures were announced last month in the Queen’s Speech, and I am sure is occupying minds at this Congress. But the IMF work argues, rightly in my view, that any insolvency regime, whether debtor- or creditor-oriented, will enhance financial stability effectively only if it protects value for the benefit of all interested parties and the economy in general; and this requires the allocation of risk among market participants to be done in a way that is predictable, equitable and transparent. Financial sector restructurings Let me turn now to my second area: financial sector restructurings, and I would like to start by noting the importance of confidence in the smooth running of a financial system. Confidence is important in most industries, but it is at the heart of the financial industry. It is confidence that permits banks to operate, as a matter of course, with gearing many times capital, and with a maturity mismatch between their assets and liabilities, often concentrated in short-term or sight deposits.