After the first climate stress test by the European banking supervisory authority, which even many banks rated as mild, the supervisors struck a harsh note.

"Banks in the euro area urgently need to step up their efforts to measure and manage climate risk, fill the current data gaps and adopt good practices already in place in the industry," said ECB Chief Banking Supervisor Andrea Enria.

104 banks took part in the climate stress test.

Even when asked, the ECB did not reveal who the 41 major banks were that had to go through the complete test.

It can be assumed that Deutsche Bank, DZ Bank and Commerzbank as well as the Landesbanken LBBW, Bayern LB, Helaba and Nord LB were checked in full.

Hanno Mussler

Editor in Business.

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The results presented on Friday for all banks tested show that Europe's banks still hardly take into account the influence their loans and investments have on the climate.

Most institutes have not even included climate risks in their credit risk models.

For only 20 percent, climate risks are a factor in the granting of loans.

The stress test also showed that almost two-thirds of bank income from corporate customers comes from transactions with greenhouse gas-intensive industries.

A bank board member told the FAZ that climate-friendly service providers or software manufacturers often have lower financing requirements than industry.

Underestimated risk

The third part of the test, which only large banks had to go through, provided information on what losses banks might suffer after the occurrence of extreme weather events such as heat waves and floods.

For the 41 banks participating in this exercise, the credit and market losses added up to 70 billion euros in the worst scenario - a rather small number, as ECB Director Frank Elderson said in a press conference.

He admitted that the number underestimated the real risks, as the ECB had refrained from combining climate shocks with economic consequences such as a recession.

Rather, their influence was limited to individual loans.

However, Elderson announced that this first stress test was the first in a series of climate stress tests.

When asked whether the ECB now wants to test the banks under its supervision for climate risks every year, he said: “It will certainly not have been the last test of this kind.” Elderson called on the banks to check their customers more directly to determine which ones consequences of a loan on the climate.

Up until now, too many banks have only used approximations.

60 percent had not even created a framework for how they wanted to complete climate stress tests in the future.

Greenpeace criticism

The environmental organization Greenpeace called the results of the stress test "terrifying" and accused the banks of not preparing for obvious climate risks, thereby endangering financial stability and actively undermining climate targets.

Greenpeace also demanded that the results should be published for each bank and have consequences.

"Banks with weak results must be obliged to do better risk provisioning."

Supervisor Elderson, on the other hand, promised the banks that the results of the stress test this year would not yet be reflected in the individual capital surcharges imposed by the ECB.

"But it is also clear that climate-related risks are among our top priorities." With these words, Elderson indicated that this could change.

By the end of the year, the ECB will publish new guidelines for considering climate risks in the lending process.

Each bank also receives feedback on its performance in the stress test, which in turn is included in the definition of its capital buffer in a “qualitative” manner.