Frank Elderson, ECB Vice-Chair, discusses the timeline and progress of climate risk management, supervisory measures, and future policy considerations in an interview conducted on 17 February 2026.
Frank Elderson, Member of the Executive Board of the European Central Bank (ECB) and Vice-Chair of the Supervisory Board, was interviewed by Laura Noonan and Nick Comfort on 17 February 2026.
He explained that the process around periodic penalty payments for climate risk management was lengthy due to the novelty of managing such risks. The ECB adopted a multi-year approach starting in 2020, with supervisory expectations, self-assessments, and reviews conducted in subsequent years. A deadline of end-2024 was set, with interim milestones, including a materiality assessment in March 2023.
All but two of the 110 banks under supervision managed climate and nature-related risks without penalties. The ECB issued 32 decisions across three waves, with most banks meeting deadlines. The approach of proportionate escalation has encouraged banks to accelerate investments and resource allocation for risk management.
Regarding supervisory findings, the ECB classifies issues into four categories, with F3 and F4 being most material. The relationship between the ECB and banks has been constructive, emphasizing risk-based supervision and proportional escalation when necessary.
On risk data aggregation and reporting, the ECB noted progress but indicated some banks still need to improve. Use of escalation tools, including penalty payments, remains under consideration.
The ECB does not comment on other jurisdictions’ policies, such as the UK’s bonus cap, but affirms its focus on maintaining supervisory standards and simplifying processes without deregulation.
Decisions within the Supervisory Board involve healthy debates, leading to consensus on issues like the high-level task force report. The ECB plans to update its guides, including those on leveraged finance, to improve clarity and remove outdated content.
On leveraged finance, the ECB is still reviewing issues like the debt to EBITDA ratio, with ongoing discussions and follow-up with banks. The targeted approach to on-site inspections aims for shorter, focused reviews with better communication, maintaining rigor while increasing agility.
Regarding synthetic risk transfers, the ECB monitors the market’s growth and risks, such as rollover risks, but has not yet considered policy limits.
The timing of implementing the Fundamental Review of the Trading Book (FRTB) in Europe is seen as urgent, with a need for timely and consistent application of Basel standards. The ECB supports the European Commission’s proposals but emphasizes the importance of a level playing field globally.
On European integration, Elderson advocates for completing the banking union, deposit insurance, and capital markets union, emphasizing the need for collective action beyond national considerations.
He commented on cross-border banking, stating that consolidation should be based on clear legal criteria, and expressed satisfaction with the progress made post-Brexit, ensuring risks are managed locally.
Regarding climate scenarios, Elderson highlighted the increasing likelihood of disorderly transitions if legislative and policy actions are delayed, emphasizing the importance of science-based risk management.
He discussed the potential for revisiting the green supporting factor, stating that banks must manage material risks, including climate risks, and that policy tools outside the ECB’s mandate are better suited for facilitating a transition to Paris agreement goals.
Finally, Elderson underscored that central banks and supervisors cannot solve all global issues alone and must focus on their core mandates of price stability, financial stability, and safe banking, while supporting broader policy actions.
