Finally, risk warnings and recommendations made by the ESRB have to be translated into concrete action, in particular by the national supervisory authorities. To conclude, the European Systemic Risk Board can be compared to a doctor who examines a patient, asking him about his ailment and suggesting that some tests be done. The doctor then makes a diagnosis and eventually recommends some medicines. It’s up to the patient to abide by the doctor’s recommendation. The doctor is not in a position to take direct action. He is not allowed to intervene, even when things get really bad, as in the case of a risk of contagion and the patient has to be put in quarantine. He might be the best doctor in the world, but his treatment will only be as good as the quality and completeness of the patient’s replies – and the patient’s willingness to take the medicines prescribed. This is the way in which the ESRB has been constructed in Europe. Its success will largely depend on the compliance of its “patients”, who hopefully have learned the lessons of this crisis. Thank you for your attention. 12  BIS Review 115/2009
Under both the LA and EA scenarios, climate change has broadly been brought under control by the end of the 30 year period. By contrast, with no additional action the impacts will persist well beyond the 30 years of our scenario – incurring substantial economic costs not captured in these estimates. [11] Even sticking within the 30 year bounds of the scenario – and focusing on financial sector impacts – the NAA scenario is pretty grim. Projected impairment rates for banks are up 50% compared with normal levels. And whereas the ‘transition’ scenarios offer clear opportunities for banks to increase their profits by investing the transition, the ‘no action’ scenario offered no such opportunities. Instead the world gets poorer and more uncertain for all sectors, particularly those directly exposed to physical risks. The ‘no action’ scenario is particularly unpleasant for life and general insurers – even sticking to the 30 year window, their losses in this scenario were worse than in the transition. For instance UK and international general insurers, respectively, projected a rise in average annualised losses of around 50% and 70% by the end of the NAA scenario. It’s worth emphasising that these costs would be mostly passed on to consumers through higher premiums. Ultimately, in a ‘no action’ scenario, we would see a reduction in access to lending and insurance for so-called ‘climate vulnerable’ sectors and households. To give an example of what this means, homes at risk of flooding would likely become prohibitively expensive to insure or borrow against.