By Huw Jones
LONDON, March 9 (Reuters) - The European Union's
financial watchdogs will test the financial sector's resilience
to shocks that could derail the bloc's push to meet a 2030
deadline for slashing carbon emission.
The EU's executive European Commission said in a letter to
the EU's banking, securities and insurance authorities that they
should conduct the one-off climate risk scenario analysis in
cooperation with the European Central Bank.
All 27 EU states have committed to turning the bloc into the
first climate-neutral continent by 2050, and have pledged to
reduce emissions by at least 55% by 2030, compared to 1990
levels.
This will need extra investments totalling 350 billion euros
($370 billion) a year over this decade, not all sourced from
the public sector, meaning a stable financial system will be
needed for raising funds.
"This one-off exercise should go beyond the usual climate
stress tests... looking also at contagion and second-round
effects, thereby giving us a better understanding of the
vulnerabilities in the financial system," John Berrigan, head of
the commission's financial services unit, told the watchdogs in
a letter published on Thursday.
"As part of this work, we would also appreciate any insights
into the financial system’s capacity to support green
investments under stress."
Any "policy relevant" conclusions should be provided to the
commission no later than the first quarter of 2025, Berrigan
said.
"The exercise should therefore be launched as soon as
possible and could be based on end-2022 balance sheet data."
Transition to the 2030 goals could be derailed by adverse
developments in the financial sector, and therefore it was
important to anticipate shocks and to react swiftly if need be,
Berrigan said.
"Results should be as differentiated (notably by countries,
types of financial institutions, economic sectors) as possible,"
he said.
($1 = 0.9452 euros)
(Reporting by Huw Jones;Editing by Elaine Hardcastle)
Messaging: huw.jones.thomsonreuters.com@reuters.net))
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