ECB to Apply Climate Risk Haircut to Corporate Loans Banks Pledge as Collateral

The European Central Bank decided on 24 July 2026 to extend its climate factor, a small valuation discount meant to capture transition risk, from corporate bonds to the corporate loans euro-area banks pledge when they borrow from the central bank.

Until now, the climate adjustment only applied to marketable debt issued by non-financial corporations, a rule that took effect in mid-June 2026. Under the new decision, the same discount will also be applied to "credit claims," the ECB's term for bank loans to companies that can be posted as collateral in refinancing operations.

The haircut is set by a three-part asset-level score: a sector-level stress measure drawn from the latest Eurosystem climate stress test, the individual borrower's exposure to transition-related uncertainties such as policy shifts, technology change, consumer behavior and litigation, and the loan's remaining maturity. Where firm- or sector-level data are missing, the Eurosystem will fall back on sector-level or alternative data.

The maximum additional reduction, applied across both bonds and credit claims combined, will be 5%, and individual credit-claim haircuts will not be publicly disclosed. Implementation is expected at the earliest by the end of 2027, with values updated annually using the same process as for corporate bonds.