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Climate Change and the Role of Regulatory Capital: a Stylized Framework for Policy Assessment

Michael Holscher et al.

Journal of Financial Regulation2025https://doi.org/10.1093/jfr/fjaf006article
ABDC B
Weight
0.37

Abstract

This article presents a stylized, non-country-specific framework to assess conceptually how the financial risks of climate change could interact with a regulatory capital regime. We summarize core features of a bank capital regime such as expected and unexpected losses, minimum capital ratios, buffers, and risk-weighted assets, and then consider where climate-related risk drivers may be relevant. While climate change could potentially impact the regulatory capital regime in several ways, an internally coherent approach requires a strong link between specific assumptions about how financial risks may manifest as bank losses and what objectives regulators are pursuing. We conclude by identifying the challenges that climate-related uncertainties pose to policymakers and highlighting potential research opportunities to better understand these complex issues and inform policy development.

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https://doi.org/https://doi.org/10.1093/jfr/fjaf006

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@article{michael2025,
  title        = {{Climate Change and the Role of Regulatory Capital: a Stylized Framework for Policy Assessment}},
  author       = {Michael Holscher et al.},
  journal      = {Journal of Financial Regulation},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/jfr/fjaf006},
}

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Climate Change and the Role of Regulatory Capital: a Stylized Framework for Policy Assessment

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.