EBF STATEMENT

ECB climate-risk stress test: A key learning exercise for banks’ climate-risk preparedness

X

BRUSSELS, 8 July 2022 – The European Banking Federation (EBF) recognizes the supervisory climate risk stress test as an important step in identifying and managing climate risks. The exercise conducted by the European Central Bank (ECB) was aimed at assessing banks’ climate-risk preparedness. It showed that banks managed to report comprehensive and innovative information on climate risk, but more should be done to incorporate climate risk into the stress-testing frameworks and internal models.

“The stress test is an important learning exercise for the banking sector and supervisors, capturing banks’ progress on integrating climate-related risks into their risk management strategies. It also served as a catalyst to accelerate the collection of climate change information from banks’ clients and methodology developments”, said Wim Mijs EBF CEO. “As we continue to work closely with the regulators on climate-risk preparedness, we must keep our shared ambition of advancing Europe’s green transformation in sight – banks have a major role to play in achieving this objective, but they can only do so if supported by governments’ industrial and climate policies.”

Financing around two-thirds of the European economy, banks play a crucial role in helping companies take the necessary steps in their sustainability journey. The latest figures show that fossil fuel financing by European banks has significantly decreased in 2021 compared to previous years, indicating a positive trend. As Europe moves towards achieving its sustainability objectives, ensuring a gradual and orderly transition to help shield society from sudden economic disruptions will be crucial. Furthermore, to support the transition to a green economy, banks need clarity and certainty of government policies in the short and medium-term. Regulatory actions across different areas, including prudential, disclosure, investment services, and others must be consistent, well-coordinated and prioritized.

The supervisory test outlines hypothetical scenarios defined by the European Central Bank. European policymakers have set out to limit the impact of climate change and have been at the forefront of global climate action, adopting ambitious legislation across multiple policy areas to implement the region’s international commitments. Ensuring key lessons from the stress test are shared at the international level will help inform the global standard-setting and international harmonization of climate policies.

x

For more information:

Rūta Barthet, EBF Senior Media and Communications Officer, r.barthet@ebf.eu

x

About the EBF:

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere