China to expand climate-related stress testing of banks, central bank chief Yi Gang says
- People’s Bank of China expects to test how climate risks in eight industries, including aviation and petrochemicals, could affect bank balance sheets
- PBOC conducted first climate-related stress testing of the financial sector last year
China plans to expand its climate-related stress testing of the financial sector after successfully conducting its first such examination in the second half of last year, China’s top central banker said on Wednesday.
“The results showed, without a low carbon transition, the enterprises of these three industries would face a weakened capacity to service debts,” he said. “Since the loans provided by banks to these three industries account for only a small share of the total, the aggregate capital adequacy ratio [of the banks] still met the regulatory requirements under all scenarios.”
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Within its stress tests, the central bank also plans to develop its own macroeconomic scenario to measure climate risks by adopting scenarios developed by the Network for Greening the Financial System (NGFS) and applying them to conditions in China.