ECB issues first ever climate risk fine to Spanish bank

The European Central Bank (ECB) issued its first-ever fine against a bank for failing to identify climate risks, as the central bank has become a world leader in ensuring financial institutions are managing the potential impact from extreme weather events.

The periodic penalty payment of €187,650 was issued to Abanca for failing to comply with the ECB’s requirement that the Spanish bank conduct a materiality assessment of its climate and environmental-related risks.

The central bank had asked Abanca to identify the risks it could be exposed by 31 March 2024. It took 65 days for the bank to meet the ECB’s request.

The decision follows a multi-year process by the ECB to make sure eurozone banks are identifying, assessing and managing climate risks. A 2022 climate stress test by the central bank found several shortcomings and financial institutions were asked to address these gaps by specific dates. The ECB warned if deadlines were not met, it could impose a penalty for each day that banks failed to meet requirements.

The ECB originally told 22 banks to remedy their shortcomings, with nearly all submitting assessments in time. Those that did not were warned they could be fined.

“Encouragingly, almost all banks submitted an adequate materiality assessment in time, which shows that our supervisory efforts have been effective in almost all cases,” ECB executive board member Frank Elderson said on a webinar in February.

However, Abanca could challenge the ECB’s decision at the European Court of Justice. It is not known whether other banks will be fined.

Periodic penalty payments are usually a measure of last resort for supervisors and are a response to persistent deficiencies in a bank’s practice, said Julia Symon, policy lead at Finance Watch. She expects more supervisory measures in 2026 on both an EU and national level when the European Banking Authority’s guidance on ESG risk management comes into effect.

“The fine demonstrates the ECB’s commitment to sound supervisory practices and consistent follow up on its recommendations in the area of environmental risk,” she said.

Bruno De Conti, senior researcher at campaign organisation Positive Money Europe, said while the penalty is small, it is “a lesson to the banking industry that the ECB is willing to follow through on its word and that all banks must comply with the climate and environment rules that are in place”.

Banks have treated the climate crisis as “something they could ignore while raking in profits” but they can no longer pretend that climate change is “irrelevant to their bottom line”, De Conti said.

“It’s time for the financial sector to understand that these regulations are serious, the surveillance is serious and the penalties will also be serious”.

Abanca did not reply to a request for comment.

Written by