|Author (Person)||Grunewald, Seraina N.|
|Publisher||European Banking Institute (EBI)|
|Series Title||EBI Working Papers|
|Series Details||Number 133|
|Publication Date||January 2023|
|Content Type||Research Paper|
It has become widely acknowledged that the looming climate crisis and the necessary transition to a low-carbon economy can and will be financially material for financial institutions. Accordingly, microprudential supervisors have started including climate-related financial risks in their daily practices. Comparatively less attention has been given to the role macroprudential policies may play in addressing these risks from a system-wide perspective.
This paper tackles climate risks as a macroprudential concern. It argues that macroprudential policies may play a key part in assessing and managing these risks, deploying new methodological means to map and model existing and evolving climate risks under different plausible scenarios. Insights from scenario analysis may help inform the use of ‘hard’ macroprudential tools to foster the robustness and resilience of the banking system against climate-induced shocks. Against the backdrop of the ongoing reform of the EU’s macroprudential framework, the paper explores how the macroprudential toolkit could be adjusted to the reality of climate-related financial risks.
|Subject Categories||Economic and Financial Affairs, Environment|
|Subject Tags||Climate Change, Financial Services, Risk | Crisis Management|
|International Organisations||European Union [EU]|