Quantitative risk

ECB publishes 2022 climate stress test results

Andreas Spyrides
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Results of ECB’s biennial thematic stress test 2022 related to climate change.

On July 8th, 2022, the European Central Bank (ECB) published the results of the Biennial Thematic Stress Test 2022 related to climate change. The exercise focused on climate-related risks, both transitional and physical. The aim was to make a comprehensive assessment relevant to the way banks incorporated climate risks into their strategy, governance, and risk management frameworks and processes.

The results of the exercise, despite notable progress, revealed that most of the Banks showed considerable deficiencies in their Stress Testing Frameworks.

Participating banks reported €70bn of aggregate losses under the 3 short-term exercises (3-year disorderly transition and the two physical risk scenarios):

  • €53bn losses reported under the short-term disorderly transition scenario
  • €17bn losses reported under the short-term physical risk scenarios (drought & heat risk and flood risk).

Note that only 41 banks were requested to provide projections.

In the below publication, we summarised the results.