Make Kitco Your Homepage

ECB considers putting climate change risks in future bank stress tests

Kitco News

LONDON (Reuters) - The European Central Bank is considering including climate-change risks in future European banking stress tests, ECB Vice President Luis De Guindos said on Thursday.

Speaking at a BNP Paribas banking conference in London, De Guindos said the monetary policy implications of climate change would come into discussion over the next quarters.

“It is something we are paying much more attention to, especially in terms of financial stability,” he said.

Climate change is becoming a bigger issue for central banks, as demand is rising for investment to be environmentally sustainable.

“Climate change involves a lot of actors and central banks have to play a role,” he said.

“For instance, something that we have started to consider is including climate change potential risks in the adverse scenario of the (banking sector) stress tests.”

A methodology for calculating risks related to climate change is not yet fully developed so it is unlikely to be included in next year’s European Banking Authority stress test, but it could be used in 2022.

The EBA stress test is an assessment of risks to the functioning and stability of financial markets across the European Union. It takes place every two years.

As part of global plans to reduce carbon emissions, the European Commission proposed last year to establish an EU-wide classification scheme for sustainable investments, known as a taxonomy.

De Guindos said the taxonomy was very important.

The ECB vice president also said the risk of a European recession was “very low” and that low bank profitability was the main financial stability risk in the euro zone.

Reporting by Elizabeth Howcroft and Marc Jones; Editing by Dale Hudson

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.