China’s banks face rising default risks as a result of higher climate-related costs in carbon-intensive sectors such as thermal power, steel and cement, central bank vice president Liu Guiping said in comments published on Friday. (18).
The People’s Bank of China completed the first phase of climate risk stress testing at 23 major banks last year, focusing on the possibility that the three sectors will be forced to pay for their carbon emissions, Liu wrote in the publication China. Bank Finance.
“Test results showed that if companies in the thermal energy, steel and cement sectors do not undertake the low carbon transformation, their repayment capacity will decrease to varying degrees under the different stress scenarios,” he wrote.
Rising issuance costs, as well as policies aimed at facilitating “industrial substitution”, would lead to the problem of idle assets and other “transition risks”, he said.
Liu said further tests would be carried out to check banks’ exposure to other high-issuing industrial sectors.
Source: CNN Brasil
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