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ECB Seeks to Reassure Banks Over Capital Hit of Climate Test

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The European Central Bank kicked off an historic review to determine how well lenders can withstand the shock of climate change, but sought to reassure the industry that the exercise won’t directly lead to higher capital requirements.

According to details published on Thursday, the ECB will examine “possible future climate policies and assess both physical risks, such as heat and droughts and floods, and short and long-term risks stemming from the transition to a greener economy.” Banks need to submit their responses from March and aggregate results will be published in July, the ECB said.