It should be realised that the delegation of monetary policy to an independent central bank is a way of generating confidence that the declared policy of the Riksdag and the government will in fact be implemented. In the coming years the rule system for monetary policy will be changed. As an adherent to the Maastricht Treaty, Sweden has undertaken to make changes in, for example, the status of the Riksbank’s governor. He or she shall not be dismissed except on explicit grounds of serious misconduct, etc. Neither is the Riksbank to be given instructions from third parties, e.g. government, except in a statutory form. It also looks as though the objective of the Riksbank is to be formulated in law and will be price stability. The question of eligibility to serve on the governing board will have to be reviewed. Active members of parliament are delegates in Sweden, which is entirely contrary to traditions in central Europe. The Riksbank differs from most central banks in Europe in that we are formally responsible for exchange rate policy. The Government sees this as a problem in EU cooperation and has therefore instituted an enquiry into exchange rate competence. In the light of what I have just said, these conclusions are not sound.
[13] This presents a challenge when considering implications for policy – and highlights the importance of continuing to plug the kinds of capability gaps I discussed earlier. As the results publication sets out, the Bank will engage with firms individually and collectively to help them target their efforts, and share good practices identified in this exercise. Implications for policy I hope it’s clear by this point that the CBES will be a valuable tool for helping us and financial firms to understand the challenges ahead. This exercise is not going to be used to set capital requirements for banks and insurers. But it clearly sheds light on that debate. The CBES results make clear that climate risk is a first-order strategic issue for the firms we regulate. But in my view it is not yet clear that the magnitude of transition costs require a fundamental recalibration of capital requirements for the system. [14] A persistent drag on profitability would be very nasty for firms, but so long as they are able to continue to make sufficient profits to maintain their capital buffers, its impact on safety and soundness might be less material. Had the results of this exercise suggested a fundamental threat to the solvency of these firms, our response would of course have been quite different. Set against that high level view, though, a world with climate change is without doubt riskier than one without.