ECB Shouldn’t Name and Shame Banks in Climate Test, Delgado Says

European Central Bank stress tests designed to expose the finance industry’s vulnerability to climate change should protect the identity of the lenders involved, according to a top ECB official.

“This should be a bit more of general lessons for the system rather than naming and shaming banks,” ECB supervisory board member Margarita Delgado said in an interview. “We don’t have enough data points, we don’t have reliable data points, we don’t have the taxonomy. Banks do not have the answers to each and every question.”

Europe is moving faster than the U.S. and Asia to make sure banks can cope with potential losses from extreme weather, and with the risk that clients who pollute might go out of business. But ECB stress tests due to be held next year have unsettled some in the financial industry amid concerns regulators in the region are moving too aggressively.

Fitch Ratings has already warned that banks may face new capital requirements as a result of climate stress tests, noting that, “as a regulator, you can’t just leave an emerging risk exposed.” Meanwhile, investors are growing more vocal in their demands that banks step up. A group of asset managers representing a combined $4.2 trillion this month wrote to 63 lenders including Deutsche Bank AG and JPMorgan Chase & Co. urging them to commit to more ambitious climate goals.

Delgado, who is also deputy governor of the Bank of Spain, said the ECB supervisory board has yet to discuss how to disclose results from next year’s stress test. But her comments suggest that investors may be facing a long wait before they can get a clearer picture of the climate risks that individual banks face.

“The green stress test next year will be a milestone, but for us it will be a learning curve together with the banks and this will not imply capital requirements for the banks,” said Delgado.

The ECB has said that the results of the stress test next year would only have an indirect effect on capital requirements for individual banks. But it also plans to gradually treat climate risk as it would any other threat to lenders.

At the same time, Delgado warned against regulators using banks as a tool for climate policy. “The change should come from governments and authorities through taxes and adequately pricing carbon emissions,” she said.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.