Dutch Regulator to Investigate How Banks Deal With Climate Risks

(Bloomberg) --

The Dutch central bank is the latest European regulator to announce it will take a closer look at how well banks are prepared to deal with the consequences of climate change.

Lenders should be aware of the effects global warming can have on their balance sheets, the Amsterdam-based institution said in its supervisory outlook published Wednesday. It will start reviewing this year how banks, insurers and pension funds incorporate environmental risks in their internal risk models.

Climate change has risen to one of the top spots on Europe’s regulatory agenda. The Bank of England announced last year it will run climate-related stress tests in 2021. The Bank of France said in November it would submit banks and insurers to a similar exercise already this year.

“We now really are going to incorporate sustainability in our supervisory methods,” Frank Elderson, executive director for supervision at the Dutch central bank, told reporters in Amsterdam. Elderson said he expects banks to take steps toward complying with sustainability goals.

The institution’s efforts won’t have formal consequences such as sanctions for banks this year, but that will change at “a given moment,” according to Elderson, who is also chairman of the Network for Greening the Financial System, a group of central banks and supervisors.

The Dutch central bank, which oversees the country’s lenders in coordination with the European Central Bank, announced it will make climate risks part of on-site investigations, and said it’s exploring how sustainability concerns can play a role in granting licenses to new entities.

To contact the reporter on this story: Ruben Munsterman in Amsterdam at rmunsterman1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Jana Randow, Craig Stirling

©2020 Bloomberg L.P.