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ECB Wipes 45% Off Home Prices in Harshest Bank Climate Test

  • Scenario revealed ahead of ECB publication due later this week
  • Europe is embarking on landmark climate stress tests in 2022
The damaged banks of the Ahr river after floods devastated parts of western Germany, in Dernau, in July.

The damaged banks of the Ahr river after floods devastated parts of western Germany, in Dernau, in July.

Photographer: Alex Kraus/Bloomberg

European banks have been told to assume that real-estate assets most exposed to flood risk could lose almost half their value, as the sector’s resilience to climate change is stress-tested over the coming months.

The European Central Bank is factoring in a 45% slump over a single year for property values in areas that are likely to experience bad flooding, Fernando de la Mora, a managing director at Alvarez & Marsal, told Bloomberg ahead of the expected publication of the ECB’s scenarios later this week. That would leave German and Dutch banks among the most exposed.