Financial regulation and supervisory policy are crucial levers to align private bank financing with Europe’s climate ambitions. European policymakers have made notable advances in integrating climate risks and, most recently, prudential transition plans into the banking regulatory framework. Yet, amid the ongoing simplification of the broader European sustainability framework, these efforts risk being undermined. Prudential supervisors must strengthen their tools to proactively manage the increasing risks of a disorderly transition and its potential impact on financial stability.
Through its past initiatives, I4CE has contributed to debates on the ambition and integrity of prudential transition plans mandated under the banking package of the Capital Requirements Directive (CRD) VI. The Institute has also recently produced several research works, including analyses of stranded asset risk and variable remuneration and prior work on regulatory disclosure frameworks. I4CE has also analysed the climate stress testing tools under pillar 2 processes, as well as quantified arguments regarding pillar 1 capital requirements.
I4CE continues to monitor the rapidly changing financial regulatory context in Europe, aiming to strengthen the transition finance framework against oversimplification. The Institute contributes to debates with other CSO partners, banks and regulators.
