German banks expect ECB climate stress test to yield 'unremarkable' results

German banks are confident that the results of the European Central Bank's (ECB) current climate stress test will be manageable for the sector. Banking association BdB head Christian Ossig said he expected the test will not reveal any dramatic burdens for the industry, and that the results will be “unremarkable for most banks,” according to a report in business daily Handelsblatt. He added that losses for the sector caused by climate change would be manageable. Ossig warned, however, against using the climate stress test as an opportunity to demand a higher equity investment from banks for long-term climate risks. It is "right" that the ECB does not want to derive any capital requirements for the banks from the "long-term and partly hypothetical scenarios".

Ossig added that further regulatory obstacles could hinder the transformation and also reduce the capacity of banks to lend money to companies for their own climate protection investments. He instead calls for anchoring sustainability in the banks’ business strategy, such as setting targets for how much CO2 emissions banks want to finance with their loans. As a result, climate risks would be taken more into account in risk management and lending. The ECB’s test results are expected to be available in July.

The Germany’s government has sought to make the country a leading location for a sustainable financial system.