Eurozone banks may face fines for ECB climate goal miss

Some eurozone banks may face fines for failing to meet the European Central Bank’s climate-related goals, according to a senior ECB supervisor’s interview published on Wednesday.

Kerstin af Jochnick, a member of the ECB’s Supervisory Board, revealed that banks have been given deadlines to incorporate climate change risks into their business practices; however, some banks have lagged behind schedule.

“We have notified a few banks that, based on our current assessment, they have not met the interim milestones, which means they face the prospect of having to pay a so-called pecuniary penalty,” Jochnick stated.

The ECB has the authority to fine banks up to 5 per cent of their daily turnover until compliance is achieved, or for up to six months. Banks are entitled to present their case before any penalty, referred to as a “periodic penalty payment,” is imposed.

Jochnick emphasised that the process is ongoing, with supervisors assessing bank submissions to determine potential penalties. This decision ultimately rests with the supervisory board.

Despite the ECB’s pressure, progress has been noted. Claudia Buch, the ECB’s top supervisor, mentioned on Tuesday that “almost all banks” acknowledged facing financial risks from climate change and were adjusting their risk management accordingly.

The ECB, responsible for overseeing the eurozone’s major banks and setting monetary policy, is expected to commence interest rate cuts on Thursday as part of its efforts to combat high inflation.