Tr. Piraeus: High score in pan-European climate stress tests

Piraeus Financial Holdings has taken note of the announcement published by the European Central Bank (“ECB”) on 8 July 2022 regarding the results of the first pan-European supervisory climate stress exercise (“Exercise”) carried out by the ECB, in order to assess the degree of preparedness of the credit institutions it supervises, regarding the proper management of climate risk.

As Piraeus Bank states in its announcement, “the Exercise was ambitious and demanding”, as it included a qualitative part focusing on the evaluation of the banks’ internal processes (module 1), a comparative analysis of the banks in terms of the correlation of income and credit exposures them in sectors exposed to climate change (module 2), but also simulation to analyze the effect of different scenarios on loan portfolios (module 3).

To ensure proportionality, medium and smaller banks, including Piraeus Bank, were not asked to include provisions for the stress testing exercise.

In totalPiraeus Bank was rated at the same level as the average of the total sample of European banks that participated in the Exercise, which demonstrates that the challenges facing the economy in general, and the Bank in relation to climate change, are similar. The results highlighted an advanced stress simulation framework for the climate risk on behalf of the Bank (module1), where Piraeus ranked highest among European bankswhile recording positive performance and data quality. On the other hand, revenue linkage with higher carbon intensive activities/sectors was higher than the average of the Exercisealso reflecting the specific characteristics of the country.

Piraeus Bank intends to leverage the results of the Exercise in order to explore in depth how to further work with its customers to lead them to lower carbon activities and thereby manage potential scenarios regarding long-term transition risk , the high concentration of corporate exposures to carbon-intensive counterparties, as well as short-term transition risks as well as physical risks.

As the Bank notes, “it intends to step up its efforts to fully integrate climate and environmental risks into its systems, processes and business decisions and to work with its customers to collectively address the impacts of climate change. In the framework this, the Bank has already developed a strategic plan to achieve zero carbon balance by 2050 or earlier and has set targets by 2030 in selected asset classes that represent more than 50% of its financed emissions.To this end, the Piraeus Bank is intensively preparing for its international commitment to set climate targets by 2022.”