Financial stability
Climate change poses significant risks to financial stability. These are classified into physical and transition risks. While the former are related to the materialisation of extreme weather phenomena, the latter stem from the costs of moving towards a more sustainable economy, that minimises physical risks. Under our mandate to contribute to greater financial stability, the Banco de España is working on developing a framework for identifying these risks in order to detect as early as possible potential threats to the financial system. Stress tests and the development of climate risk indicators are key to this task.
- Climate stress tests
Climate risk indicators: exposure to climate change in pictures
Regulation and supervision
Banking regulation and supervision-related work is under way in different areas with a view to ensuring that credit institutions are ready to identify, measure, manage and report on climate change-related financial risks, thereby contributing to the transition process.
In October 2020, the Banco de España published “Banco de España supervisory expectations relating to risks posed by climate change and environmental degradation 
(414 KB)”. It sets out explicitly how it expects credit institutions to consider these risks in their business models and strategy, their governance and risk management, and in the disclosure of information to third parties. These expectations are in line with the European Central Bank’s "Guide on climate-related and environmental risks"
published in November last year and aimed at significant institutions under its direct supervision.
As to the next steps, the Banco de España will initially assess less significant institutions’ degree of alignment with supervisory expectations, and then the headway made by them, pursuing an approach similar to that defined by the ECB for significant institutions. Expectations will progressively evolve as a result of this review, and of the regulatory developments that may arise.
The Banco de España also participates in the main international fora in which climate-related prudential banking regulatory and supervisory matters are addressed (BCBS, ECB and EBA). The key documents arising from this participation are set out below:
Final documents
- Report on the role of environmental and social risks in the prudential framework of credit institutions and investment firms - 2023
- BCBS Principles for the effective management and supervision of climate-related financial risks - 2022
- EBA final draft implementing technical standards (ITS) on Pillar 3 disclosures on ESG risks - 2022
- Final EBA report on management and supervision of ESG risks for credit institutions and investment firms – June 2021