The European Central Bank (ECB) issued a paper named “Designing a Macroprudential Capital Buffer for Climate-Related Risks”.
The study explores how climate risks should be accounted for in the regulatory framework, providing an analysis of how macroprudential capital buffers can be tailored to effectively address the systemic aspects of these specific risks.
The ECB has decided to dive into the the possibility of systemic risk buffer (SyRB) as a tool to address climate-related systemic risks. Its methodological framework would likely use climate stress tests to account for forward-looking nature of climate risks.
Find our detailed analysis here.