The European Central Bank (ECB) has warned that “no entity supervised “meets all expectations of the institution regarding climatic and environmental risks, noting that, although almost all banks have developed plans to improve their practices in this regard, the quality of these differs considerably and their implementation is “too slow”.
“No supervised bank is close to meeting all expectations of the ECB on climate and environmental risks “, has indicated the institution after completing their first assessment of how banking Europe is adapting its practices to manage climate risks and environmental in line with the expectations set a year ago.
The analysis, which includes the 112 directly supervised banks by the ECB, whose combined assets are around € 24 trillion, concludes that the entities have taken initial steps to incorporate the climate-related risks, but none are close to complying with all the expectations of the supervisors.
“Almost all banks have developed plans to improve their practices. However, the quality of these plans varies considerably and the progress is too slow, “he says.
In fact, the supervisor warns that only a third of banks has established plans that are at least broadly adequate, and the half will not have completed the implementation of their plans by the end of 2022.
In this sense, it indicates that half of the evaluated banks expect climate and environmental risks have a material impact on your risk profile in the next three to five years, the risks being credit, operating and business model the most affected.
“In general, banks have struggled to meet expectations of the ECB as regards management bodies, the appetite for risk and operational risk management “, points out the ECB, which, without However, it warns that entities are lagging behind in areas
such as internal reporting, market risk management and liquidity and stress tests.
Thus, half of the banks have not planned concrete actions to integrate climate and environmental risks into their strategies trade, and less than a fifth have developed indicators risk factors to monitor.
In particular, the ECB notes that all the banks that judged that are not exposed to climate-related risks had deficiencies important in your risk assessment.
The ECB will publish in the first quarter of 2022 its findings regarding disclosure by entities of their environmental risks and climatic, along with individual comments to banks.
Also, as a next step, you will carry out a full review of preparing banks to manage climate risks and environmental, with in-depth analysis of its incorporation into the strategy, governance and risk management.
This review will take place in the first half of 2022, together with the ECB’s supervisory stress test on risks weather-related, so banks will receive a request for information towards the end of 2021.
“The time has come for banks to adopt comprehensive measures and forward-thinking about environmental and related risks the weather. The message of today’s report is clear: now is the time to act, “said Frank Elderson, member of the Executive Committee
of the ECB and Vice-Chairman of the Supervisory Board of the ECB.