However, the international community of banking supervisors does insist that ignoring the ongoing climate and environment crises as well as the transition towards a more sustainable economy is no longer compatible with sound risk management. At the ECB we published our guide with supervisory expectations for banks’ risk management practices of climate-related and environmental risks in 2020.
Nor was the discipline enforced by the market, which did not care very much about the growing indebtedness of some of the countries, until the crisis struck. Then, of course, there was a sharp backlash and even an overreaction. The other weakness which was exposed by the crisis had to do with banking regulation.