European Central Bank speech urges banks to prepare for unpredictable climate shocks

According to the European Central Bank’s published address, Frank Elderson, vice-chair of its Supervisory Board, delivered a speech on 14 October 2026 that called on banks to prepare for climate- and nature-related shocks whose timing and scale they cannot predict. The address to an ECB–Bank of England conference in Frankfurt argued that better risk measurement was necessary but could not replace resilience built before a shock occurs. [1]

Climate scenarios help banks explore plausible futures but are not forecasts, according to the speech. It warned that relying on a narrow range of scenarios could leave gaps in risk identification and capital planning. [1]

The European Central Bank’s published address pointed to limits in banks’ current exercises: climate stress tests and scenario analyses cover every risk driver that banks themselves consider material in around 15% of cases. It also said the average share of interest income that significant supervised banks earn from carbon-intensive sectors has remained above 70% since 2022. That figure concerns interest income, not the share of banks’ total lending or assets. [1]

Elderson’s speech, published by the European Central Bank, acknowledged substantial progress by banks and supervisors in managing climate and nature risks. It urged banks to maintain capital, liquidity and operational capacity while considering how underwriting, risk appetite, portfolio decisions and pricing could help them respond. The speech set out an approach to preparedness, not a new ECB requirement. [1]