EU Banks Expand Risk Scenarios They Face From Climate Change
- Liquidity risks from climate now modeled by a third of banks
- ECB climate test results seen as understatement of real risks
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European banks are building out their risk models to better prepare for the fallout from climate change, with some even examining the short-term liquidity implications of a hotter planet, according to a joint survey conducted by the Association for Financial Markets in Europe and Oliver Wyman.
The analysis, published on Thursday, found that 87% of the banks surveyed have started conducting their own annual internal climate stress tests, in some cases using modeling that goes beyond requirements set by regulators. That’s amid a general consensus that previous exercises understated the real risks, the survey found.