Australia's banking system is protected from the inevitable risks related with climate change

A risk assessment study by Australia's banking regulator has shown that possible economic downturns conditioned by climatic change could threaten the loan portfolios of the country's five leading banks. At the same time, neither the system nor the economy will be in a state of severe stress. 

As everyone's attention shifts to global climate change, banking entities have been under scrutiny for their involvement in fossil fuel projects. This pushes banks to set targets to reduce emissions and invest more in clean energy projects. 

On Wednesday, the Australian Prudential Regulation Authority (APRA) reported that risks for banks related to climate change are likely to affect specific industries and regions of the country. In addition, mortgage lending losses are anticipated to be greater in the northern part of Australia.

In addition, the study predicted that losses for banks could be higher from lending to economic segments that are subject to the risks related with transition to an economy with lower emissions. Among such industries, for example, mining, manufacturing and transport.

The regulator also noted that banks have announced their intention to review their risk appetite, as well as change some of their lending approaches.