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Reuters
29-07-2025
- Business
- Reuters
ECB to consider 'climate factor' when lending to banks
FRANKFURT, July 29 (Reuters) - The European Central Bank will add climate change considerations to its lending operations from late 2026, it said on Tuesday, raising pressure on banks to channel financing towards greener sectors as the euro zone seeks to reduce its carbon footprint. The ECB regularly lends to banks on both shorter and longer durations against appropriate collateral, and while such lending has been muted in recent years, an uptick is expected as the bank slowly reduces excess liquidity in the financial system. "The Governing Council has decided to introduce a 'climate factor' which could reduce the value assigned to eligible assets pledged as collateral, depending on the extent to which an asset can be impacted by these uncertainties," the ECB said in a statement. The new policy, set to come into effect in the second half of 2026, is expected to act as a buffer against the possible financial impact of uncertainties related to climate change, it said. While the U.S. Federal Reserve earlier this year left a global initiative looking at ways to police climate risk in the financial system, the ECB doubled down, opens new tab on its own commitment to take climate risk into account. The bank has already been pushing commercial lenders to disclose more and more of their climate-related risk and has often complained that they have been too slow to respond. It has threatened to fine banks if they do not comply. The ECB's new "climate factor" will focus on marketable assets issued by non-financial corporations and adverse events specifically associated with the green transition, the bank said.
Reuters
29-07-2025
- Business
- Reuters
ECB to introduce 'climate factor' into lending operations
FRANKFURT, July 29 (Reuters) - The European Central Bank will add climate change considerations to its lending operations from next year, potentially reducing the value of collateral if the underlying asset is deemed risky to climate-related shocks, it said in a statement on Tuesday. "The Governing Council has decided to introduce a 'climate factor' which could reduce the value assigned to eligible assets pledged as collateral, depending on the extent to which an asset can be impacted by these uncertainties," the ECB said in a statement. "This acts as a buffer against the possible financial impact of uncertainties related to climate change," the ECB said, adding that the measure is due to be implemented in the second half of 2026.
