The European Central Bank (ECB) plans to impose fines on several creditors for the first time in history. The reason is their long-term failure to assess the consequences of climate change.
This is reported by Bloomberg.
What fines are at risk
According to knowledgeable sources, at least four banks are facing fines for non-compliance with the deadlines set by the ECB for assessing climate risks.
Fines increase daily and can reach 5% of the bank's average daily income. For example, a bank with annual revenue of €10 billion faces daily fines of €1.4 million in the most severe scenario, although in reality the amounts could be much lower. It is also known that the amounts of the fines are not yet final and may be symbolic.
The message states that the above-mentioned banks will be charged daily fines until they correct the situation. However, at the same time, they can reduce or even cancel some fines.
Why it matters
The ECB has repeatedly warned that lenders are not preparing enough for the consequences of extreme weather shocks that can affect asset values, or to the risk of client bankruptcy.
European regulations require banks to assess whether they are exposed to material risks and reflect this in their capital reserves. The ECB noted that lenders need to understand all relevant climate and environmental risk factors and how they affect their overall exposures.