In an interview with NRC, Frank Elderson, a senior official at the European Central Bank, explained that although the ECB is not responsible for climate policymaking, it must take climate and environmental risks into account to fulfill its core mandate of maintaining price and financial stability.
Elderson stressed that climate change already has measurable economic impacts, citing examples such as disruptions to transport and rising food prices caused by extreme weather. Ignoring these factors, he argued, would mean overlooking key drivers of inflation. He also pointed out that Europe’s dependence on fossil fuels creates additional risks for price stability, which the ECB must assess, even if it does not shape energy policy itself.
He highlighted that banks are required to identify and manage all relevant risks, including those linked to climate change and biodiversity loss. While significant progress has been made in recent years—with most supervised banks now mapping their exposure to such risks—important gaps remain. Some institutions still lack a complete overview or consistent risk management practices across all regions.
On regulation, Elderson underlined that banks are now much stronger than during the 2008 financial crisis, thanks to stricter supervision, higher capital requirements, and reforms such as the European banking union. He warned against rolling back these rules, noting that trust in the financial system can be quickly lost.
The interview also touched on the growing role of non-bank financial institutions, often referred to as “shadow banking.” Elderson acknowledged that while diversified financing sources can strengthen the economy, this sector is less transparent and less regulated, requiring closer international monitoring as it expands.
Looking ahead, he emphasized the importance of completing the European Union’s financial architecture, including the banking union and capital markets union, to support investments in areas such as the green transition, defense, and digitalization. Overall, Elderson made clear that managing climate risks and maintaining a resilient financial system are closely interconnected priorities for the ECB.
