Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, 10th Annual Conference on Bank Steering & Bank Management at the Frankfurt School of Finance & Management
Frankfurt am Main, 22 June 2022
I understand that today’s audience includes managers and experts from banks and banking associations, supervisors, academics and students. So this is an ideal platform for exchanging views on the financial sector’s role in addressing the risks of the ongoing climate and environmental crises. Conferences like these are a chance to inform each other of what we are doing and to share the knowledge and expertise we are accumulating to gear ourselves to a world that is already undergoing a climate crisis. Physical and transition risks from climate change and environmental degradation are already materialising all around us.
Today I will update you on the recent progress on both the international agenda and the ECB’s own supervisory agenda on climate-related and environmental risks, or C&E risks for short. I will share some preliminary findings from our review of how banks incorporate C&E risks into their risk management practices.
There will be good, bad and hopeful news.
The good news is that, one year after my first speech on the state of C&E risk management by euro area banks as Vice-Chair of the ECB’s Supervisory Board, banks are starting to progress in their management of these risks. The bad news is that this progress is not across the board, and laggards remain in all areas. But there is hopeful news too. The silver lining is that the state-of-the-art governance and risk management practices now being adopted by some banks confirm that what the ECB is asking is possible. We just need all banks to do it.
The new Basel Committee on Banking Supervision principles for the effective management and supervision of climate-related financial risks
All around the world, there is a growing consensus on the urgency of dealing with the climate and environmental crises. For banks, the prominence of C&E risks is significant, too. During various supervisory exercises recently conducted by the ECB, most banks recognised that they have significant exposures to these risks, which they expected to materialise in the short to medium term. And we see that banks are consequently allocating more and more financial and human resources to managing these risks.
And this is what supervisors around the world expect from banks. Just last week, the Basel Committee on Banking Supervision, the main global standard-setter for the prudential regulation of banks, published its “Principles for the effective management and supervision of climate-related financial risks”.
These principles have been prepared in a Basel Committee task force that I co-chair. They are a major milestone, as it means that supervisors…
