Featured Product

    ECB to Incorporate Climate Change in Monetary Policy Framework

    July 04, 2022

    The Governing Council of the European Central Bank (ECB) announced its decision to incorporate climate change considerations in the Eurosystem’s monetary policy framework. ECB decided to adjust corporate bond holdings in the monetary policy portfolios and the collateral framework of the Eurosystem, to introduce climate-related disclosure requirements, and to enhance its risk management practices.

    The measures to incorporate climate change considerations are designed in full accordance with the Eurosystem’s primary objective of maintaining price stability and support the green transition of the economy, in line with the climate neutrality objectives of the European Union. Tto fulfil such objectives, the Eurosystem will:

    • tilt corporate bond holdings toward issuers with better climate performance through the reinvestment of th esizable redemptions expected over the coming years. The measure aims to mitigate climate-related financial risks on the Eurosystem balance sheet and provide incentives to issuers to improve their disclosures and reduce their carbon emissions in the future. The Eurosystem aims to gradually decarbonize its corporate bond holdings, on a path aligned with the goals of the Paris Agreement. ECB expects these measures to apply from October 2022 and will start publishing climate-related information on corporate bond holdings regularly as of the first quarter of 2023.
    • as part of the collateral framework, limit the share of assets issued by entities with a high carbon footprint that can be pledged as collateral by individual counterparties when borrowing from the Eurosystem. The new limits regime aims to reduce climate-related financial risks in Eurosystem credit operations. ECB expects these measures to apply before the end of 2024.
    • only accept marketable assets and credit claims from companies and debtors that comply with the Corporate Sustainability Reporting Directive (CSRD) as collateral in Eurosystem credit operations. The climate-related disclosure requirements for collateral will help improve disclosures and generate better data for financial institutions, investors and civil society. ECB expects this new requirement will be applicable to all companies within the scope of the CSRD from 2026.
    • further enhance its risk assessment tools and capabilities to better include climate-related risks. Additionally, the Eurosystem agreed on a set of common minimum standards for how national central banks’ in-house credit assessment systems should include climate-related risks in their ratings. These standards will enter into force by the end of 2024.

    Going forward, ECB will include climate change considerations in areas of its work besides monetary policy, including banking supervision, financial stability, economic analysis, statistical data and corporate sustainability. ECB will also ensure to regularly review all the measures and assess their effects in terms of fulfilling monetary policy objectives, supporting decarbonization, improving climate data and climate risk modeling or regulation, and addressing additional environmental challenges, within its price stability mandate.


    Related Links

    Keywords: Europe, EU, Banking, Securities, ESG, Climate Change Risk, Disclosures, Climate Neutrality, Decarbonization, Corporate Bonds, Collateral Framework, CSRD, Financial Stability, ECB

    Featured Experts
    Related Articles

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938