The ECB going green: Impact on the interrelationship between monetary policy and banking supervision?

Abstract

The European Central Bank (ECB) has recently launched several initiatives in order to integrate climate-related actions under its monetary policy and banking supervision tasks. The ECB ‘going green’ has sparked debate among legal scholars and central bankers. What has been left untouched, however, is how climate-related action relates to the current organizational structure within which the ECB executes its two main tasks. The SSM Regulation has installed a Chinese Wall between these matters, which have to be conducted in ‘complete separation’ from one another. This article questions this structure in the light of the ECB's climate-related efforts. What are the implications of climate change and the ECB's climate-related actions for the interrelationship between monetary policy and banking supervision? The consequences of climate change are likely to be omnipresent, and will produce effects reaching far beyond specific policy areas. In such a context, the ECB could benefit from more coordination and monitoring of what is decided under each task instead of carrying them out in isolation from each other. It will be argued that climate-related action has triggered an coordinative evolution within the ECB, leading to and more awareness on how monetary policy and banking supervision are inherently intertwined.