Suffice it to say, it is conceivable that the Federal Reserve’s net-interest margin could be pinched in certain environments – say if the economic recovery turned out to be very robust. But our analysis shows that it is extremely unlikely that the Fed’s net-interest margin will turn negative. In part, that is due to the fact that the balance-sheet risk associated with the interest-rate mismatch is offset to a large degree by the fact that the cost of much of the Fed’s liabilities – the amount of currency outstanding – is zero. So when short-term rates rise, the cost of a significant portion of the Fed’s liabilities is unaffected. Making policy during a crisis involves making tough choices. Perfect solutions are not always achievable or even legally feasible. I can assure you that our decisions have been made carefully, always with an eye toward finding the right balance between the risks and rewards of alternative options. Most critical is our commitment never to take actions that might compromise our ability to retain our control of monetary policy and that might undermine our ability to achieve our dual mandate of full employment and price stability. Thank you for your kind attention. I would be very happy to take a few questions. BIS Review 94/2009  7
Undertaking the net zero journey themselves will help central banks and supervisors gain a better understanding of the challenges that financial institutions face when considering climate-related and biodiversity risks in their activities. The NGFS will provide guidance on integrating sustainability considerations across the range of central bank functions. We will follow up on past work relating to sustainable and responsible investment (SRI) principles for central banks1. We will explore suitable metrics for central banks’ disclosure of climate-related and environmental risks, including climate-related governance structures and strategy. We will consider how disclosures for internal operations should be prepared, including a stocktake of how central banks are reducing their environmental and carbon footprint. Let me now move on to NATURE-RELATED RISKS. The NGFS will mainstream the consideration of nature-related financial risks across our work. Nature-related risks and biodiversity loss have garnered significant attention in recent years, and rightly so. Biodiversity supports all life on our planet. But we are eroding this biodiversity at a pace that is damaging the natural ecosystems that provide us food, water, and clean air. This in turn could pose significant risks to economic, financial, and social stability. Failure to address nature-related risks could adversely affect financial institutions and financial system stability. It is imperative that central banks and supervisors consider these risks in fulfilling their mandates. The financial sector should align itself with the transformations that are necessary to deliver a global economy that is positive for nature.