European banks nowhere near ready for ECB climate stress test

European banks are nowhere near ready for the looming European Central Bank climate stress test, according to new figures.

A survey of 20 major European banks shows there is universal agreement among lenders that they are not prepared for the ECB’s climate stress test.

The ECB has voiced its concern over European banks’ lack of preparedness for the impending financial challenges climate change poses. Banks that fail to pass the climate stress test will have to adhere to higher capital requirements, leaving less available to distribute to shareholders.

A string of severe weather events in Germany, Italy and Greece, among other European countries, over the summer has brought the impacts of climate change on the continent into sharp focus.

A dearth of client data breaking down their climate change credentials is the main barrier to compliance with the stress test, European banks warned. Bloomberg reported banks are lobbying the central bank not to make the results of the stress test public.

President of the ECB, Christine Lagarde, has hit out at European banks’ lack of progress toward meeting the central bank’s ambitious climate targets.

In July, she said a “substantial majority” of banks overseen by the ECB are not meeting the central bank’s expectations.

A recent ECB survey showed 90 per cent of banks admit their climate reporting does not or only partially meets the central bank’s requirements.