The European Central Bank published an interview with Executive Board member and Supervisory Board Vice-Chair Frank Elderson describing how ECB Banking Supervision has pushed banks to improve management of climate and nature-related risks and is now seeing broad compliance, while also moving to simplify supervisory processes. Elderson said 108 of 110 supervised banks delivered without the ECB having to impose periodic penalty payments. He outlined a multi-year supervisory approach that started with expectations in 2020, bank self-assessments and action plans in 2021 and a progress review in 2022, followed by an end-2024 deadline with interim milestones, including a March 2023 materiality assessment. Where assessments were not up to standard, banks received formal decisions, leading to 32 decisions across three waves (22, nine and one), with the first-wave extended period ending with all but two banks delivering on time and the later waves still under assessment. Elderson also pointed to changes under the Supervisory Review and Evaluation Process, including a two-tier classification of findings with four categories, where F3 and F4 are treated as the most material and F1 and F2 are shared but not actively pursued. On risk data aggregation and reporting, he said progress is insufficient at too many banks and that the ECB will move up an escalation ladder from supervisory dialogue to non-binding and binding letters, with periodic penalty payments “neither imminent nor excluded”. Supervisory simplification was described as including shorter, more focused on-site inspections and shorter reports, and a review of supervisory guides and communications to shorten or retire documents, improve consistency and make their non-binding status clearer. Elderson said it was too early to comment on potential substantive changes to the leveraged finance guide, while follow-up from the leveraged finance review continues; he also said the ECB is monitoring risks from synthetic risk transfers as the market grows and wants clarity “quickly” on how and when Europe will implement the Fundamental Review of the Trading Book, in line with its contribution to the European Commission’s proposal.
European Central Bank 2026-02-19
European Central Bank says 108 of 110 supervised banks met climate and nature risk milestones without penalty payments and advances supervisory simplification
The European Central Bank (ECB) reports broad compliance from banks in managing climate and nature-related risks, with 108 of 110 banks meeting expectations without penalties. Executive Board member Frank Elderson highlighted supervisory simplifications, including streamlined inspections and reports, but noted insufficient progress in risk data aggregation. The ECB is also monitoring synthetic risk transfers and seeks clarity on implementing the Fundamental Review of the Trading Book.