Featured Product

    ECB to Expand Climate Change Work in 2024-2025

    February 23, 2024

    Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks. To this end, the European Central Bank (ECB) announced, in January 2024, that it would expand its climate change work in 2024 and 2025. Through its 2024-2025 climate and nature plan, ECB aims to focus on the nature-related risks, greener monetary policy, and the impact and risks of the transition to a green economy, including investment needs and transition costs.

    As a banking supervisor, ECB emphasizes that institutions must adopt a strategic, forward-looking, and comprehensive approach to considering climate-related and environmental risks. ECB highlighted this in its comprehensive guide on climate-related and environmental risks, which was published in November 2020. In November 2022, ECB began applying additional capital requirements to banks that fail to effectively manage climate and environmental risks. At that time, ECB also set staggered deadlines for banks to progressively meet all the supervisory expectations laid out in its guide on climate-related and environmental risks by the end of 2024. This includes full integration into the Internal Capital Adequacy Assessment Process (ICAAP) and stress testing. ECB continues to incorporate climate-related risks into financial stability assessments, which include analyzing disclosure, pricing, and greenwashing risks in financial markets.

    ECB plans to continue its work on climate risk as a top priority for 2024-2026. Very recently, in its climate and nature work plan, ECB announced that, as part of its expanded focus on climate risk, the regulator will be undertaking the following initiatives in 2024 and 2025:

    • Bank supervision. Assess and follow up on banks’ alignment with ECB supervisory expectations, further integrate climate risks into prudential frameworks and support rules for better climate-related disclosures in European and international fora, and perform various supervisory actions on climate and environmental aspects, including preparatory work on transition planning
    • Climate-related data. Regularly expand and release updates of climate change-related indicators, acquire and provide climate-related data, and integrate climate data points into its own data collections
    • Stress testing and scenarios. Contribute to the Fit-for-55 stress test and chair the workstream of the Network for Greening the Financial System (NGFS) on Scenario Design and Analysis, leading the development of short-term scenarios and the provision of regular updates and improvements of long-term scenarios
    • Physical impact of climate change. To better understand the physical impact of climate change on economic variables, explore the economic implications of the climate adaptation policies and associated investment needs that are required to make the economy more resilient to a changing climate
    • Financial stability analysis. Incorporate green transition policies into conjunctural analysis and macroeconomic models, further develop risk monitoring and the macro-prudential policy framework, and continue work on sustainable finance
    • Monetary policy strategy and implementation. Implement climate-related pool limits in the collateral framework, introduce climate-related disclosure requirements in the collateral framework from 2026, and consider climate change in the preparation of monetary policy decisions
    • Other key aspects. Consider environmental aspects in the preparatory phase of the design of a digital euro, consider the relevance of environmental risks in the oversight of financial market infrastructures, and consider eco-design of the next euro banknote series and of banknotes with 100% organic cotton by 2027


    Visit Moody's Analytics Climate and ESG Risk Microsite to find more about how banks can proactively incorporate climate and ESG insights into their risk assessment process.


    Related Links


    Keywords: Europe, EU, Banking, ESG, Climate Change Risk, Low-Carbon Economy, ECB

    Featured Experts
    Related Articles

    BIS and Central Banks Experiment with GenAI to Assess Climate Risks

    A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe

    March 20, 2024 WebPage Regulatory News

    Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures

    Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.

    March 18, 2024 WebPage Regulatory News

    Singapore to Mandate Climate Disclosures from FY2025

    Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies

    March 18, 2024 WebPage Regulatory News

    SEC Finalizes Climate-Related Disclosures Rule

    The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.

    March 07, 2024 WebPage Regulatory News

    EBA Proposes Standards Related to Standardized Credit Risk Approach

    The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU

    March 05, 2024 WebPage Regulatory News

    US Regulators Release Stress Test Scenarios for Banks

    The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

    February 28, 2024 WebPage Regulatory News

    Asian Governments Aim for Interoperability in AI Governance Frameworks

    The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.

    February 28, 2024 WebPage Regulatory News

    EBA Proposes Operational Risk Standards Under Final Basel III Package

    The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.

    February 26, 2024 WebPage Regulatory News

    EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS

    The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.

    February 23, 2024 WebPage Regulatory News

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News
    RESULTS 1 - 10 OF 8957