Report: Europe’s banks need to raise game on climate risk

Jul 7, 2022, 3:23 PM | Updated: Jul 8, 2022, 3:24 am

FRANKFURT, Germany (AP) — Europe’s banks aren’t sufficiently considering risks from climate change and must “urgently step up efforts” to make sure they understand the possible impact of floods, wildfires and losses on investments.

That was a key conclusion from a climate stress test on 104 banks run by the European Central Bank and released Friday.

The ECB said that for now the climate stress test was a learning exercise that would not result in requiring banks to strengthen their financial buffers against possible losses from borrowers who can’t pay.

But the bank’s supervisory arm warned that as things stand now, 60% of the 104 surveyed banks have no framework for assessing the impact of climate risk on their financial solidity, and only 20% consider climate risk when granting loans.

Banks in southern Europe were more exposed to risks from heat and drought that could hit construction and agricultural businesses, the report indicated.

Banks “currently fall short of best practice” when it comes to assessing the risk that borrowers would not be able to repay loans due to climate-related incidents. It noted that almost two-thirds of bank income comes from corporations in industries that emit large amounts of carbon dioxide, leaving them vulnerable to loss as businesses have to shift to lower-emission production.

Banks have received feedback from the ECB and “are expected to take action accordingly” under the supervisor’s best practices guidelines. The ECB is the banking supervisor for the 19 countries that use the euro. Banks are key to keeping the economy running well because they are the primary source of credit and financing for businesses in Europe, a contrast to the US where more financing comes from financial markets.

The report said a smaller sample of 41 banks from the test would have suffered 70 billion euros in losses under a “disorderly transition” scenario in which the price of carbon emissions rises dramatically over a three year period.

The report said that banks would suffer lower losses if efforts to fight climate change were stepped up enough to keep the increase in global average temperatures to 1.5 degrees Celsius or less. Losses would be larger in scenarios under which efforts to limit the temperate rise were postponed and then drastically increased, or simply not undertaken. The ECB noted that banks “barely differentiate” between differing long-term scenarios that could affect their businesses.

The findings from the test will serve as “a compass” for banks to boost their awareness of climate issue and prepare for the risks and opportunities of a transition to net zero, that is, a situation in which any carbon dioxide emissions are small enough to be absorbed by the environment or abated through methods such as underground storage.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - Malaysia Airlines planes taxi at a terminal while taking passengers at Kuala Lumpur Internat...
Associated Press

Malaysia aims to add US flights after safety rating boost

KUALA LUMPUR, Malaysia (AP) — The U.S. Federal Aviation Administration has upgraded Malaysia’s air safety rating to Category 1, allowing the country’s carriers to expand flights to the United States after a three-year hiatus, Transport Minister Wee Ka Siong said Saturday. Wee said the move will bolster tourism and economic growth in Malaysia, which opened […]
1 day ago
FILE - China's ambassador in Geneva ambassador Chen Xu makes a media statement criticising the U.S....
Associated Press

Western push on China, Russia at UN rights body faces test

GENEVA (AP) — Western countries are leading a rare two-pronged push at the U.N.’s main human rights body to better scrutinize the human rights records of two big world powers: China, over allegations of abuses during an anti-extremism campaign in western Xinjiang, and Russia, over its government’s crackdown on dissent and protest against the war […]
1 day ago
Russian President Vladimir Putin joins hands with Moscow-appointed head of Kherson Region Vladimir ...
Associated Press

Russia accused of ‘kidnapping’ head of Ukraine nuclear plant

KYIV, Ukraine (AP) — Ukraine’s nuclear power provider accused Russia on Saturday of “kidnapping” the head of Europe’s largest nuclear power plant, a facility now occupied by Russian troops and located in a region of Ukraine that Russian President Vladimir Putin has moved to annex illegally. Russian forces seized the director-general of the Zaporizhzhia Nuclear […]
1 day ago
Associated Press

Athletics take 5-game losing streak into matchup against the Mariners

Oakland Athletics (56-101, fifth in the AL West) vs. Seattle Mariners (86-70, second in the AL West) Seattle; Saturday, 4:10 p.m. EDT PITCHING PROBABLES: Athletics: JP Sears (6-3, 4.22 ERA, 1.34 WHIP, 45 strikeouts); Mariners: Luis Castillo (7-6, 3.06 ERA, 1.11 WHIP, 159 strikeouts) FANDUEL SPORTSBOOK LINE: Mariners -268, Athletics +218; over/under is 6 1/2 […]
1 day ago
FILE - Latvia's Prime Minister Krisjanis Karins speaks with the media as he arrives for an EU summi...
Associated Press

Latvian leader’s party expected to fare well in election

HELSINKI (AP) — Polling stations opened Saturday in Latvia for a general election influenced by neighboring Russia’s attack on Ukraine, disintegration among the Baltic country’s sizable ethnic-Russian minority and the economy, particularly high energy prices. Several polls showed the center-right New Unity party of Prime Minister Krisjanis Karins emerging as the top vote-getter with up […]
1 day ago
The founder Te-Wang Lin of the Taiwan People Communist Party places a Chinese police hat down on th...
Associated Press

Hong Kong leader promises revival on China’s National Day

BEIJING (AP) — Hong Kong’s leader promised Saturday to revive its struggling economy following a campaign to crush a pro-democracy movement as China’s ruling Communist Party marked its 73rd anniversary in power under strict anti-virus controls. In Beijing, crowds of spectators watched a 96-member honor guard raise the Chinese flag on Tiananmen Square in the […]
1 day ago

Sponsored Articles

Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
Swedish Cyberknife 900x506...

June is Men’s Health Month: Here’s Why It’s Important To Speak About Your Health

According to the Centers for Disease Control and Prevention, men in the United States, on average, die five years earlier than women.
...

Anacortes – A Must Visit Summertime Destination

While Anacortes is certainly on the way to the San Juan Islands (SJI), it is not just a destination to get to the ferry… Anacortes is a destination in and of itself!
...

Ready for your 2022 Alaskan Adventure with Celebrity Cruises?

Celebrity Cruises SPONSORED — A round-trip Alaska cruise from Seattle is an amazing treat for you and a loved one. Not only are you able to see and explore some of the most incredible and visually appealing natural sights on the planet, but you’re also able to relax and re-energize while aboard a luxury cruise […]
Report: Europe’s banks need to raise game on climate risk