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ECB can price climate risk better than the market

Europe Materials 25 January 2021 15:42
The European Central Bank can price climate risk better than market participants and should make its own environmental analysis when conducting monetary policy
ECB can price climate risk better than the market

The European Central Bank can price climate risk better than market participants and should make its own environmental analysis when conducting monetary policy, ECB board member Fabio Panetta said on Monday, Trend reports with reference to Reuters.

Panetta said the ECB should take the consequences of climate change into account in its economic analysis and policy implementation, for example when it values the collateral that banks post in return for its loans.

“The ECB has to protect its balance sheet from the financial risks caused by climate change that are not correctly priced by the markets,” Panetta said.

“By performing its own analysis of these risks on the basis of rigorous methodologies, the ECB can contribute to the accurate valuation of these climate-related risks.”

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