Still, Y2K was valuable to the financial community in so far as it opened our minds and increased our sensitivity for problems that nobody had encountered or envisaged before. Today, however, the situation is different and considerably more complex. The events of September 11, 2001, have clearly increased our awareness further. Looking back to the time before the attacks we seem to have tended to underestimate the probability and consequences of disruption. So what needs to be done to make sure that we do not continue to underestimate threats? How can the resilience in financial systems be improved? What are the responsibilities of each and all of us? At the level of a single financial institution objectives and measures - in terms of back up solutions, staff safety and training, testing procedures, and contingency planning in general - may have to be newly defined. A specific issue that has probably not yet received enough attention everywhere is the internal crisis management process. Establishing a crisis management committee, which coordinates decisions and communication in times of crisis, can be vital, especially for large and complex financial institutions acting globally. On top of this, crisis management needs to be tested in general. One of the simpler scenarios could be: what happens if a bank is - for whatever reason - not able to release S.W.I.F.T. messages? In addition, crisis management of a single institution must involve its customers, its business partners and peers, its service providers and its utility providers. Crisis management is therefore a very demanding activity.
A huge amount of work has already been done: the recommendations of the FSB’s Task Force on Climate-related Financial Disclosures (TCFD) provide a comprehensive and consistent basis for the voluntary disclosure of information about risks. In addition, I propose that we identify European best practices, and move gradually towards a compulsory transparency requirement in Europe, provided that two conditions are met in order to avoid overburdening financial institutions: this requirement should be based on (i) a “comply or explain” principle and on (ii) a common taxonomy with a sufficiently broad level of aggregation. France already requires by law13 that asset managers, banks and insurance companies publish information about the way they take climate change into account. On top of that, we should develop forward-looking carbon stress tests for both insurance companies and banks – what I call “the video of risks”. It is obviously a complex and difficult task, but it is essential. Today we are able to perform sensitivity analyses to ascertain the size of probable losses for financial institutions’ portfolios under a range of economic scenarios. But one of our duties in the NGFS will be to carry out additional work on two key issues: (i) how to translate climate change scenarios into economic scenarios that can be used in our stress testing frameworks, and (ii) assessing the impact of shocks on the probability of default over a much longer horizon than the usual one of one year. 2.