A gradual green transition supports financial stability

Analysis - November 2020 - No. 21

Authors Korsgaard, Søren; Toftegaard Grandjean Helmersen, Olivia; Roulund, Rasmus Pank
Subject Financial stability; Climate; Stress Tests
Type Analysis
Year 2020
Published 3 November 2020
Danmarks Nationalbank has performed a climate stress test to highlight transition risks in the banking sector. The analysis shows that the banks are generally well equipped to handle transition risks. However, a drastic transition in which the banks need to make large impairment charges over a short time frame may result in a capital shortfall. The banks should take climate risks into account in their risk management and capital planning.