ECB's Elderson says climate stress tests cover all material risks in 15% of cases
Frank Elderson used a keynote at the ECB-Bank of England conference on supervising climate risk to sort climate and nature risks into known knowns, known unknowns and unknown unknowns. The core supervisory message: scenario analysis is indispensable but incomplete, and banks remain early in integrating these risks into core models. The speech extends the same logic to AI, quantum computing and demographic shifts.
- Elderson said climate stress tests and scenario analysis in the ICAAP cover all the risk drivers banks deem material in only around 15% of cases.
- The average share of interest income from carbon-intensive sectors at significant supervised banks has remained above 70% since 2022.
- The 2026-28 supervisory priorities treat heightened uncertainty as a cross-cutting challenge raising the likelihood of extreme tail risks.
- Elderson extended the climate framework to AI-enabled cyber risk and to quantum computing's 'harvest now, decrypt later' threat to cryptography.