Macroprudential policies and climate risks

24 Pages Posted: 18 Jan 2023

See all articles by Seraina N. Grunewald

Seraina N. Grunewald

University of St. Gallen (HSG); Radboud University Nijmegen

Date Written: January 17, 2023


It has become widely acknowledged that the looming climate crisis and the necessary transition to a low-carbon economy can and will be financially material for financial institutions. Accordingly, microprudential supervisors have started including climate-related financial risks in their daily practices. Comparatively less attention has been given to the role macroprudential policies may play in addressing these risks from a system-wide perspective. This paper tackles climate risks as a macroprudential concern. It argues that macroprudential policies may play a key part in assessing and managing these risks, deploying new methodological means to map and model existing and evolving climate risks under different plausible scenarios. Insights from scenario analysis may help inform the use of ‘hard’ macroprudential tools to foster the robustness and resilience of the banking system against climate-induced shocks. Against the backdrop of the ongoing reform of the EU’s macroprudential framework, the paper explores how the macroprudential toolkit could be adjusted to the reality of climate-related financial risks.

Keywords: macroprudential policy, climate change, climate-related financial risk, systemic risk, scenario analysis, climate stress testing

JEL Classification: E58, G18, G21, K23

Suggested Citation

Grunewald, Seraina, Macroprudential policies and climate risks (January 17, 2023). European Banking Institute Working Paper Series 2023 - no. 133, Available at SSRN: or

Seraina Grunewald (Contact Author)

University of St. Gallen (HSG) ( email )

St.Gallen, 9000

Radboud University Nijmegen ( email )

Postbus 9108
Nijmegen, 6500 HK

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