On July 8th, 2022 the European Central Bank (ECB) published the results of the 2022 climate risk stress testing exercise, focusing on banks’ progress towards developing climate risk stress-testing frameworks, their capacity to produce climate risk factors and climate risk stress test projections, and the key risks faced by banks in terms of transition risks and acute physical risk events. The ECB highlighted that the 2022 climate risk stress test will not have any direct capital implications for the supervised institutions, given the exploratory nature of the exercise, the supervisory findings will feed into the annual SREP assessment only indirectly and in a qualitative way.
In their assessment, the ECB analysed qualitative and quantitative information as well, such as governance-related aspects, data availability, adequacy of transmission channels, scenario development capacity, asset class coverage, concentrations of sectoral income, financed greenhouse gas emissions and hypothetical stress test projections. The ECB published the methodology and scenarios underlying the bottom-up stress test in October 2021 and January 2022, respectively.
We have summarized below the key highlights related to ECB’s latest expectations, formulated next steps, and industry benchmarks that resulted from the 2022 climate risk stress test exercise. Deloitte can help you navigate this vast universe of ECB requirements related to climate- and environmental risks and climate risk stress testing, and we can support you in the implementation of the ECB expectations, based on our methodologies, insights, and experience from FSI ESG projects delivered for several ECB supervised banks.
Ottó’s experience spans across green lending, climate risk materiality assessment and stress testing, external review of ESG frameworks, credit risk assessment and risk appetite management, project management (Agile and waterfall), and designing risk management technologies for data management, exposure aggregation and credit risk workflows. Ottó joined Deloitte from Morgan Stanley where he held roles in Credit Risk and Credit Technology since 2014. Previously, Ottó worked at Citibank in financial controlling, and he holds an MSc in Investment Analysis.