A crucial point is to avoid any tax distortions to the detriment of these products compared to liquid and risk-free investments. It remains all the more essential to fully inform investors about the risks involved when they invest their savings; two examples come to mind today, unit-linked contracts, and managers offering disintermediated financing. 3) My third and last collective wish for 2016 is that of financial stability and sound financial institutions. Since the financial crisis, the regulatory framework and the supervisory and oversight architecture have been considerably strengthened. This was necessary, I believe no one here doubts it. In the banking sector, this involved implementing Basel III / CRD4-CRR, finalising the TLAC, the new anti-shock weapon, and setting up the European banking union, which now includes two effective mechanisms: the single supervisory mechanism, and -since 1 January- the single resolution mechanism. Today, French banks are sounder: their core Tier 1 solvency ratio stood on average at 12% in September 2015, against 6% at end-2007. And contrary to the fears that have often been expressed, including by some of you, the current situation shows that these rules have not impacted lending and growth, in particular thanks to the positive effects of monetary policy. In 2016, the projects still underway should be completed. In particular in order to improve the comparability of internal models – and thus improve their credibility –, not to substantially increase overall capital requirements. To finalise and stabilise Basel III, not to open a new Basel IV.
The NGFS have started to explore this, but more work will be needed as the impacts of climate change and the transition to net-zero start to come into sharper relief. At the Bank, the Monetary Policy Committee (MPC) recently had its first informal discussion on the macroeconomics of climate change, and climate is an increasingly important part of G7 discussions between central banks and finance ministries. But more work and discussion is needed. Specifically, there is particular value in: (1) further integrating climate and macro modelling; (2) understanding and sizing related transmission channels; (3) going beyond the aggregate impacts to understand sectoral implications; and (4) assessing how the transition might affect the demand and supply sides of the economy. What is increasingly clear is that the effects of climate  3  See A first assessment of financial risks stemming from climate change: The main results of the 2020 climate pilot exercise, ACPR, May 2021 3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  change and the transition to a net-zero economy will manifest over time - so analysis needs to span the short, medium and long-term to capture fully these effects. Let me now turn to how we are embedding climate risk management in the financial firms that we regulate. We have worked to deepen our understanding of risks to the financial system and build resilience to climate change both at the macro and micro prudential level.