Central banks report good progress on developing climate stress testing but critics point to weaknesses, including difficulties in modelling for catastrophic shocks to financial stability.
Stress-Testing
Six largest US banks to participate in pilot climate stress test
In 2023, six of the largest US banks are to participate in a pilot climate stress test lasting for about a year so supervisors can better manage climate-related financial risks.
UK’s CCPs pass exploratory stress test
The three UK central counterparty clearing houses (CCPs) were able to withstand a simulated simultaneous default of two clearing members resulting in the largest losses or negative liquidity, according to a Bank of England (BoE) stress test.
Bank of England revives annual cyclical scenario stress tests
Rising global interest rates, deep recession and crashing asset prices are highlights of the Bank of England’s (BoE’s) annual cyclical scenario stress test on banks after a two-year absence following the Covid-19 pandemic and Russia’s invasion of Ukraine.
Fed to conduct pilot climate stress test on biggest banks
Six of the largest banks in the US are to participate in a pilot climate scenario analysis to help supervisors and firms to better manage climate-related financial risks.
Banks ace stress tests - but next one might be harder to pass
As the prospects for the US economy darken, the stress test results published on June 23 show systemically important banks are able to swallow substantial losses if a recession materialises.
UK financial firms face huge climate-related losses
Climate change could inflict huge credit losses on financial firms according to the Bank of England’s latest stress tests, although these would still be manageable for the industry.
Fed stress test focuses on plunging real estate and bond prices
Severe falls in the prices of commercial real estate and corporate bonds are all part of this year’s stress tests being conducted by the US Federal Reserve to assess the resilience of the 34 biggest banks.
EU banks withstand severe stress tests
Very severe economic and market conditions would see a capital depletion of €265bn for EU banks, but their common equity tier 1 (CET1) capital would remain above 10%, according to the European Banking Authority’s (EBA) latest stress tests, published on July 30.
US banks show their mettle during stress tests
The 23 largest banks in the US passed the latest stress tests with flying colours and could stomach nearly $500bn in losses without breaching regulatory capital levels suggesting they have weathered the Covid-19 pandemic well.
@RiskRegulator
