The Bundesbank criticizes that German financial institutions do not deal enough with the dangers of global warming. A “climate stress test” for the industry shows what the consequences could be.
The state banking supervisory authority wants to help people with sustainable investments. “Investors are almost drowning in transparency, but they have no clarity,” said the President of the Federal Financial Supervisory Authority (BaFin), Mark Branson, today at a Bundesbank conference in Frankfurt am Main. “You get too much information that’s too complex.” It is important for BaFin to ensure clarity so that investors can make sensible decisions.
Private money for “green” conversion
“Greenwashing destroys trust,” said Branson, “that’s one of the greatest risks of transformation.” Because private capital is urgently needed for the green transformation of the economy. It’s not just about bank loans. “Green credit and green investing are not low-risk,” Branson warned. “Many projects will fail. That’s in the nature of things.”
Branson described “dark green” as ecologically and socially impeccable investments, which are usually associated with a high risk because they are new to the market. In contrast, most plants sold as sustainable invested in normal companies and only excluded polluters. “It has little impact on sustainability,” Branson said. He suggested offering a third asset class: funds that invest in making companies more climate-friendly. “We need new ways to mobilize private capital for the brown-to-green transformation,” Branson said.
“The Plot Is Missing”
A “climate stress test” shows how climate change is directly affecting banks. The Bundesbank simulated a drastic increase in the price of CO2 and calculated the effects on the lending business of German banks. A total of 16 billion euros would be lost, which is considered “rather moderate”. Banks that finance companies that are particularly harmful to the climate would have to write off up to two percent of their lending business. But Volksbanks and savings banks that finance agriculture and forestry or work in flooded areas would also be severely affected by climate change.
The Bundesbank criticizes that German bank managers do far too little with climate risks. “The plot is missing,” said bank supervisor Alexander Schulz. In the future, sustainability will be a focus of state supervision. It’s not about enforcing political goals. Rather, risks of the economically important banking business would be controlled. “We don’t make climate policy,” said Susanne Korbmacher from the Bundesbank. “Our topic is the risk perspective.”
When asked whether Germany’s banks could find out the results of the climate stress test, Bundesbank supervisor Korbmacher said no. Only if things look bad will the topic be addressed in supervisory discussions with bank directors.
Conflicts between banks and state supervision
The banking industry feels increasingly patronized by the authorities. More and more control is taking the banks’ breath away, criticized Marija Kolak, President of the Association of Volksbanks, to applause from several hundred bank representatives. The board of directors of a Volksbank with 140 full-time positions reported on the fringes of the conference that four people were exclusively busy with notifications, reports and key figures for state supervision. Karolin Schriever from the Savings Banks Association warned of a future with perfect banking regulation, in which nothing would be gained for sustainability and companies would have migrated to America.
The head of banking supervision at the Bundesbank, Karlheinz Walch, was unimpressed. He presented a new system of state control: the almost 1,300 banks and savings banks in Germany are divided into four risk classes. The two low-risk banks would be relieved of requirements so that the risky institutions could be looked at more closely. “We will exhaust our supervisory tool kit,” announced Walch.