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ECB to Start Work in 2022 to Add Climate Risk to Capital Bar

  • Regulator could set individual bank scores on climate risk
  • Discussion on methodology may last until 2023, beyond
    

    

Photographer: Jonathan Nackstrand/AFP/Getty Images

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European bank regulators are set to start work later this year on adding climate-change risks to the framework for setting capital requirements, in a shift that would penalize lenders for failing to prepare for losses from extreme weather and the shift to clean energy.

Several members of the European Central Bank’s supervisory board say they expect to begin discussions in the second half of 2022 once they’ve received results from an ongoing climate stress test and accompanying review. Determining the methodology is likely to be contentious and take until next year or beyond, the people said, meaning a new approach to setting individual requirements could still be several years away.