In an interview, European Central Bank Executive Board member and Supervisory Board Vice-Chair Frank Elderson reiterated that climate and nature-related risks are material financial risks that banks must manage and that supervisors and central banks must reflect in supervision and monetary-policy analysis, while climate policy itself remains for elected politicians and existing EU policy frameworks. He pointed to rising inflation-adjusted natural-disaster losses (Munich Re estimates averaging USD 181 billion per year over the past 30 years, USD 236 billion over the past ten years, USD 261 billion over the past five years, and USD 320 billion in 2024) and highlighted potential impacts on credit and inflation, including mortgage exposures to large-scale fires and the 2022 drought that lifted food inflation by around 0.7 percentage points when parts of the Rhine were not navigable for months. On monetary policy, Elderson said the ECB monitors broad indicators including capital-market developments but focuses on the money market interest rate; after the deposit facility rate was lowered to 3% in December, he cited inflation falling from close to 10% at end-2022 to 2.4% at end-2024 while noting services inflation is still 4% and warning against moving too quickly or keeping rates too high for too long. He added that markets, and he personally, do not see easing as finished, but declined to anticipate the Governing Council’s next rate decision on 30 January. Elderson also said the Single Supervisory Mechanism and Single Resolution Mechanism have been robust for a decade and that cross-border consolidation is possible where legislators’ criteria are met, while supporting the ECB and European Insurance and Occupational Pensions Authority proposal to increase insurance coverage for natural catastrophes through risk pooling across Member States. He said he will choose his words more carefully in response to past internal criticism and confirmed his intention to serve his full eight-year ECB Executive Board mandate.
European Central Bank 2025-01-17
European Central Bank's Elderson reaffirms climate-risk supervision and suggests the easing cycle may not be finished after the deposit rate cut to 3%
ECB Executive Board member Frank Elderson stressed the financial risks from climate and nature-related factors, urging banks to manage these and supervisors to include them in analyses. He noted rising natural-disaster losses' impacts on credit and inflation, while highlighting the ECB's focus on money market interest rates amid falling inflation. Elderson supported more insurance for natural catastrophes and confirmed his commitment to his full ECB mandate.