ECB wants Dutch banks to take climate risks seriously

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ECB wants Dutch banks to take climate risks seriously

Only one in three Dutch banks considers the impact of climate damage on the loan portfolio. That is far too little, according to the European Central Bank (ECB). ‘Banks are there to make estimates based on historical data,’ says NVB chairman Medy van der Laan.

Roughly speaking, a drought such as the area around the Po River in Italy is currently experiencing. If the Netherlands experiences something similar, the economic damage would be enormous. And due to the climate crisis, sooner or later that will happen.

Yet banks still take far too little account of such scenarios in their risk analyses. That is also the decision of the ECB, which states that only one in three banks in the Netherlands includes climate damage in its analyses.

The drought in the area around the river Po is dramatic for the Italian economy. (ANP / Zuma Press)

‘What the ECB is now asking our banks to take into account those risks in their portfolios and their actions,’ says van der Laan. ‘That’s quite complicated. Because banks are there to make their calculations from historical data and then put an amount on it. What you have to do now is to estimate what might happen in the future.’

Find the right balance

It comes down to finding the right balance, says the chairman of the Dutch Banking Association. ‘You don’t want to underestimate the risk, but you don’t want to overestimate it either. That would mean that your products would become much more expensive.’ It is a difficult exercise, but banks are fully engaged in it, says van der Laan.

The NVB chairman points out that this runs parallel to helping to reduce global warming, in which banks also play a role. The ECB wants all Dutch banks to have taken steps in the analysis of climate risks by the end of 2024.


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