The ECB warns that no European bank meets its expectations in the face of climate change



The European Central Bank (ECB) has highlighted that almost all banks have developed plans to address risks related to climate change, although it has warned that “none of the supervised entities” meets all the expectations of the institution in this regard, as pointed out by Frank Elderson, a member of the board of the central bank and vice-chairman of the Supervisory Board of the ECB.

“Everyone is still a long way from meeting the supervisory expectations we have set,” Elderson acknowledged during a conference, where he warned that all banks “have several blind spots” and may be exposed to significant climate risks . “Our initial general snapshot is quite disappointing,” said the ECB executive.

In fact, based on the most recent data, Elderson has indicated that 90% of the reported practices are considered by the banks themselves only partially or not at all in line with the ECB’s supervisory expectations, while more than half of the entities do not has an approach to assessing the impact of climate risks and only about 40% have assigned explicit responsibility for managing these risks to the governing body. “Of the 20% of banks that have a systematic way of assessing climate risks, almost all find that climate risks are already having, or are about to have, a significant material impact on their risk profile.”

“Banks often state that their lack of progress in incorporating climate risks into their risk management frameworks is due to a lack of available data, but in reality few banks have made any effort to take stock of what kind of data would they really need to start accounting for climate risks, “he added. “The soundness of the global financial system also depends on us holding banks accountable for the way they manage climate risk,” he said.

For this reason, the ECB executive has ensured that all banks “must catch up” quickly on the incorporation of climate risks, since their commitments on this issue will eventually influence their supervisory requirements. The European Banking Authority (EBA, in its acronym) plans to hold an examination of European banks on its climate risks next year.

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