Central bank group to assess potential cases for central bank digital currencies

Daniel Fowler
January 22, 2020

Its report warns of "green swan" events, putting an environmental brushstroke to unpredictable and severe "black swan" economic events.

The Switzerland-based Bank for International Settlements (BIS), considered the central bank of central banks, announced the creation of the new group in a statement.

A new report from an global banking organization (stay with me) suggests that climate change could trigger the next major economic crisis in the world, and warns that the planet's response to rising temperatures could "have catastrophic and irreversible effects that could be quantified would make financial damage impossible".

The BIS said this could be the template used in the case of climate change.

If the more extreme climate scenarios start to play out, central banks, having played a vital role in the financial crisis, might be asked to step in as the "climate rescuer of last resort".

New policy mixes are needed instead, involving governments, central banks and prudential or capital requirements.

The Bank for International Settlements (BIS), of which the Reserve Bank of Australia is a member, has published a report on possible "Green Swan" events, ie the drastic effects of climate change on the global economy. "Traditional approaches to risk management consisting in extrapolating historical data and on assumptions of normal distributions are largely irrelevant to assess future climate-related risks".

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The Reserve Bank of Australia has become increasingly outspoken about the need to treat climate change as a growing financial risk, including by Deputy RBA governor Guy Debelle who told a conference in August past year that "climate is a challenging risk to assess but an increasingly necessary one".

The warning comes as federal treasurer Josh Frydenberg said that he was "not in a position" to confirm whether the Morrison government remained committed to delivering a budget surplus, following the impacts of bushfires that have devastated communities across Australia over the summer.

World Vision Australia, Oxfam Australia, Plan International Australia and Save the Children Australia have joined forces to issue a plea for stronger climate measures.

"There is certainty about the need for ambitious actions despite prevailing uncertainty regarding the timing and nature of impacts of climate change", the paper says. "We can not afford to waste any more time", it said in a statement on Tuesday.

The four charities have called for the Coalition government to sign the Intergovernmental Declaration on Children, Youth and Climate Action.

The group pointed to a food crisis in southern African, severe floods in Indonesia and a 2018 deadly cyclone in Mozambique.

"Australians are suffering through the devastating ongoing fallout from our worst fire season on record, with dozens of lives, thousands of homes and more than a billion creatures lost".

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