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ECB Warns Banks of Climate-Test Risks That Could Hit Capital

  • Regulator stepping up pressure on banks over carbon risks
  • ECB had earlier signaled displeasure at banks’ progress
Europe carbon Coal Plant climate
Photographer: Bartek Sadowski/Bloomberg
Updated on

The European Central Bank is stepping up pressure on lenders to prepare for stress tests next year that will show just how vulnerable the industry is to climate change, according to people familiar with the process.

The ECB, which earlier this year voiced displeasure over finance industry efforts to respond to climate risks, has sent out confidential documents to banks stating they’ll need to provide data on how their balance sheets might fare through 2050, the people said. The regulator also plans to study the link between profits and carbon risk in banks’ portfolios, they said.