Eurozone banks must be legally bound to adopt plans that determine how they will reduce their exposure to climate risks over the next 30 years, European Central Bank board member Frank Elderson said on Wednesday, Reuters reported.
The ECB is putting pressure on 114 banks that are being monitored to address climate change risks - such as weather hazards and new rules aimed at reducing emissions - through stress tests and disclosure requirements (an official document outlining the terms, risks and rules of a financial transaction, such as a loan or investment).
Elderson, who is part of the banking supervisory board on the ECB‘s Executive Board, said banks should be empowered to deal with climate risks, or they may never justify their „lofty intentions“.
„Only by introducing mandatory transition plans can the „lofty intentions“ of banks over the next 30 years become concrete action now“, Elderson said at an event hosted by the Austrian financial regulator.
The ECB‘s powers as a supervisory authority are limited by European and national law, according to Reuters. This has in the past put the ECB in a difficult position, for example when it tried to force banks to get rid of bad credit more quickly and faced opposition from Members of the European Parliament on infringing on their prerogatives.
