Joint Lietuvos Bankas / ECB workshop 2024 - Call for papers

The Macroprudential Policy Group (MPPG) will hold its annual workshop in Vilnius on 15 October 2024, jointly hosted by Lietuvos Bankas.

Background

Climate change and nature degradation-related risks can have a material impact on the financial sector. The report of the joint ECB/ESRB project team on climate risk recognises that there can also be a systemic perspective with mechanisms that can amplify the losses of individual financial institutions via different transmission channels. In the same context, the European Commission has identified that prudential regulators and supervisors need to review the macroprudential framework and find an adequate manner to address the systemic aspects of climate change-related physical and transition risks.

This workshop will discuss current and possible future macroprudential measures to address risks related to climate change and nature degradation. It will also discuss the challenges in the calibration and implementation of these measures.

Objectives

This workshop aims to strengthen the dialogue between policymakers and researchers to enhance our collective understanding of the effectiveness of macroprudential policies to deal with climate change and nature degradation.

We welcome theoretical and empirical contributions on the following topics:

Targeting systemic risks of climate change and nature degradation

To address the financial stability impact of climate and nature degradation-related risks, it is important for macroprudential policy to capture both existing risks in the balance sheets of financial institutions as well as dynamic effects of structural changes in the financial system and the real economy. Stress tests as well as other analytical approaches can help to capture the system-wide vulnerabilities resulting from interconnectedness, propagation effects and feedback loops. Identifying the relevant transmission channels will contribute to a more effective design of macroprudential policies to address the sources of systemic risks.

Mitigating climate risks and supporting the green transition

Macroprudential measures can promote financial institutions to better incorporate the longer-term risks of climate change and nature degradation in their lending activities. These macroprudential measures should however be aligned with prudential objectives and not disproportionally constrain lending to the real economy or the financing of the green transition. We are interested in studies that clarify the design choices with respect to the calibration and implementation of such macroprudential measures. Some authorities have already implemented preferential treatment of certain lending categories or developed support programs to achieve sustainable finance objectives. Studies that evaluate the design and outcomes of such programs would also be of great interest.

Increasing the resilience of the financial sector to climate risks

Macroprudential policy can strengthen the capacity of the financial sector to withstand shocks resulting from the systemic aspects of climate-related risks.

The sectoral systemic risk buffer could be considered a relevant measure to limit concentration and foster appropriate pricing for lending that is particularly exposed to risks of climate change and nature degradation. Its activation and calibration would however require a robust methodology to identify these risks and adequate availability of relevant data.

Borrower-based measures could also contribute to mitigating risks from climate change and nature degradation and support the green transition. More specifically, they could address fragmentation effects stemming from the energy-efficiency of commercial and residential real estate. Analytical studies that focus on the design of borrow-based policy measures as well as empirical research that evaluates the effectiveness of borrower-based measures to address climate and nature degradation-related risks would help to understand the relevance of these measures and their optimal calibration. 

The organisers welcome submissions from academics, authors working for members of the European System of Central Banks (ESCB), the Single Supervisory Mechanism (SSM) or the European Systemic Risk Board (ESRB), as well as members of other organisations or international financial institutions with a professional interest in the issues outlined above.

Interested authors should send either completed draft papers (strongly preferred) or extended abstracts to workshopmacropru@ecb.europa.eu by 16 August 2024 with the email subject “MPPG workshop submission”. All submissions should be in English (in PDF format) and should include an abstract, as well as the name and email address of a nominated author who could present the paper.

Selection process and workshop attendance

The organising committee will review all submissions received by the deadline, looking at their quality, their policy relevance, and the level of interest that they are likely to generate. The committee will also consider the overall balance of the workshop, in terms of subject matter and approaches. All authors will be notified by 30 August 2024 as to whether their papers have been accepted.

Expenses

The travel and accommodation expenses of all attendees, presenters and discussants representing members of the ESCB, ESRB, EU organisations or international financial institutions should be covered by their own organisations. No participation fees will be charged.

Organising committee

• Carsten Detken, MPPG Co-Chair
• Tomas Garbaravičius, MPPG Co-Chair
• Nijolė Valinskytė, Lietuvos Bankas
• Marco van Hengel, MPPG Secretary
• Evelyn Herbert, IWG Secretary
• Anne McTaggart, MPPG Secretariat