Posted on 19 June 2018
Banks could measure the financial risk of assets like coal, oil and gas
Brussels, Belgium - 19 June 2018
The European Banking Authority should assess whether banks could be made to measure the financial risk of assets like coal, oil and gas, according to a European Parliament committee vote today.
If banks are made to reveal the financial risk of unsustainable assets, the costs of those assets will go up, making them less attractive, so the MEPs’ position could be good for the climate.
MEPs were voting on a package of legislative proposals from the European Commission that aim to make the banking system more stable: the Capital Requirements Regulation and its accompanying directive (CRR-CRD).
MEPs will also consider, in their trilogue negotiations with the EU Commission and Council to finalise the banking laws, whether to include climate risk in the list that supervisors use to challenge banks on financial risks. Doing so would make it much easier to track whether banks are investing in assets which harm or help the climate.
Sébastien Godinot, Economist at WWF European Policy Office
“Reducing financial support for fossil fuels is one of the most effective ways of fighting climate change and moving to a renewable energy system. This is why WWF urges the European Commission and Council to support the Parliament’s position on banks and financial risk when the three institutions finalise the capital requirements legislation, and calls on the European Banking Authority to produce its assessment swiftly.
“We urge MEPs to take their sustainable credentials a step further, and say financial supervisors should include climate risk assessment in their daily work, bringing such risk to front of stage,” continued Godinot. “This is hardly a radical position - it is supported by many supervisors themselves! We call on all MEPs to address this issue in the trilogue negotiations.”
The EU Council adopted its position on the CRR-CRD on 22 May. The European Parliament approved a negotiating mandate today, which will be formally announced in plenary in the first week of July. Following that, a first trilogue discussion will take place also in July. Since the incoming Austrian Presidency of the European Council has said this file is a priority, it will likely aim for agreement by the end of its term in December 2018.
If the European Banking Authority report says banks should assess the financial risk of unsustainable assets, the next European Commission could propose legislative changes to this effect. If it did so in the early part of its next mandate, by 2020, these changes would have to be approved by Member States and the European Parliament and could enter into force a few years later.
Sébastien Godinot, Economist, WWF European Policy Office
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Sarah Azau, Senior Communications Officer, WWF European Policy Office
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