Template-Type: ReDIF-Article 1.0

Author-Name: Eszter Boros
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: borosesz@mnb.hu


Title: Risks of Climate Change and Credit Institution Stress Tests

Abstract: Climate change is one of the greatest challenges of our time, even in the short
term, and financial institutions will not escape its economic effects either. Focusing
on the key players of the Hungarian financing model, i.e. commercial banks, the
essay reviews how the risks associated with climate change can be assessed in
the context of stress tests. To do this, it considers the most recent literature on
the topic and aspects that have emerged in analyst practice. The discussion of the
connected issues of this special stress testing process contributes to developing the
framework of domestic bank climate stress tests, to identifying the most important
challenges, and it provides guidelines for their management. The most significant
revealed difficulties are the accurate capturing of climate shocks and identifying
their macroeconomic channels. In addition, the transformation of standard banking
risk models may also require significant work.

Classification-JEL: C51, C58, G17, G21, Q56
Keywords: sustainable finance, climate change, carbon neutral transition, stress test, risk management
Pages: 107-131
Volume: 19
Issue: 4
Year: 2020
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-19-4-e1-boros.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:19:y:2020:i:4:p:107-131