Objectives of the session
The European Central Bank (ECB) published an updated assessment of the progress of European banks on climate and environmental risks disclosures. In January 2022 the European Banking authority published pillar 3 technical standards putting together comparable disclosures and KPIs, aiming at ensuring an appropriate level of information about institutions’ ESG exposures, risks, and strategies. These recommendations are built on existing initiatives, like those of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB).
These efforts of supervision authorities come in a context where the BCBS has stressed that standard Pillar 1 instruments might be suboptimal in addressing climate risks, while the Pillar 2 framework enables that banks effectively manage such risks. However, the NGFS work issued in May 2022, highlighted the need to assessing vulnerabilities at the counterparty level in a forward-looking manner, which requires further work to refine forward-looking tools as well as to examine the relevance of transition plans.
Such a context raises various question the session will try to illuminate, which range from the current level of sustainability risk in EU banks’ balance sheets, the speed by which EU banking institutions incorporate sustainability risk assessment and mitigation arrangements, the expected evolution of the global and EU bank framework and the possible macro-consequences on the banking sector in the EU. Possible level playing challenges globally as well as the supervisory practices, will also be touched upon.
Points of discussion
- What is the level of climate related bank risks, as off recent supervisors’ reviews in the EU and in other regions?
- What are the possible evolutions of the bank supervisory and regulatory frameworks?
- What are the main challenges posed to the EU banking sector in this context?