by Francesco Canepa
FRANKFURT (Reuters) – A sudden spike in carbon prices combined with floods and droughts this year would result in cumulative losses of around 70 billion euros for major eurozone banks, the Central Bank said on Friday. European.
And the ECB specifies that this estimate, which results from the sector’s first climate stress tests, only takes into account the credit and market risks of the 41 banking establishments concerned, therefore not the indirect consequences, such as a possible economic crisis favored by climate change.
The tests also show that the majority of banks in the euro zone do not have a climate risk modeling framework and do not take it into account in their credit granting decisions.
“Banks in the euro zone must urgently redouble their efforts to measure and manage climate risk, reduce the existing gaps in available data and adopt the good practices already present in the sector,” said Andrea Enria, the head of banking supervision at the ECB.
The findings of the new tests will have no impact on the capital that banks will have to set aside and will only be taken into account in the ECB’s supervisory work “from a qualitative point of view”.
The institution is also conducting a “thematic review” to assess the progress made by banks in integrating climate and environmental risks into their activities.
(Report Francesco Canepa, French version Marc Angrand, edited by Jean-Stéphane Brosse)
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