Systemic Risk Buffers – The Missing Piece in the Prudential Response to Climate Risks


Climate-related financial risks can potentially destabilize the financial sector. This fact is acknowledged by the major international financial bodies – the Financial Stability Board (FSB), the Bank for International Settlements (BIS), the International Monetary Fund (IMF) – as well as by the Central Banks and Supervisors Network for Greening the Financial System (NGFS). In Europe, climate change poses systemic risks, as emphasized by the European Systemic Risk Board (ESRB) and the European Central Bank (ECB). Financial supervisors must thus urgently take steps to address this situation and ensure that financial systems are resilient to systemic risks from climate change. This policy brief calls for deploying systemic risk buffers to address these risks.