A sudden jump in carbon prices coupled with floods and droughts this year would lead to losses of at least 70 billion euros ($71.1 billion) for the euro zone’s largest banks, the European Central Bank said recently , according to Reuters.
The ECB said the estimate in its first climate stress test significantly understated actual losses for the 41 banks in the sample because it focused only on credit and market risk and did not take account of indirect effects such as an economic downturn.
This could soon become relevant as the euro zone struggles with drought, rising energy prices and possibly even a halt to gas supplies from Russia in the autumn in retaliation for sanctions imposed over its invasion of Ukraine.—AN
