Legal & Regulatory News

European Central Bank publishes letter to significant institutions setting out information on methodology and participation in its 2022 climate risk stress test

18 October 2021

On 18 October 2021, the European Central Bank (ECB) published a letter which was sent to the Chief Executive Officers of significant institutions that it directly supervises regarding the ECB's 2022 climate risk stress test (2022 CST). The 2022 CST will run from March to July 2022 and aims to identify vulnerabilities, industry best practices and the challenges faced by banks. The 2022 CST is also intended to help enhance data availability and quality, and to allow supervisors to better understand the stress-testing frameworks banks use to gauge climate risk.

The structure of the 2022 CST will consist of three distinct modules:

  • Module 1: An overarching questionnaire assessing how banks are developing stress test capabilities.
  • Module 2: A peer benchmark analysis allowing comparisons to be drawn across banks using a common set of risk metrics.
  • Module 3: A bottom-up stress test targeting transition and physical risks.

Click here to view the ECB's letter.

Click here to view the methodology for the 2022 CST.