ECB wipes 45% off home prices in harshest bank climate test

European banks have been told to assume that real-estate assets most exposed to flood risk could lose almost half their value, as the sector's resilience to climate change is stress-tested over the coming months.

An ECB review last year found that 22% of euro-area bank exposures face high physical risk, more than half of which are related to wildfires, with floods making up the bulk of the remainder. Foto: Reuters/Regis Duvignau

The European Central Bank is factoring in a 45% slump over a single year for property values in areas that are likely to experience bad flooding, Fernando de la Mora, a managing director at Alvarez & Marsal, told Bloomberg ahead of the expected publication of the ECB's scenarios later this week. That would leave German and Dutch banks among the most exposed.

An ECB spokeswoman declined to comment on the details of the stress test...

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