Financial institutions

The climate-biodiversity-pollution nexus: the pricing of environmental credit risks for European

12/09/2025 European Central Bank Central banks

This study examines how euro area banks factor pollution-induced biodiversity risks into lending decisions, using data from 832 banks and 5,000 major polluters. Our results show that banks are increasingly pricing these risks by adjusting loan-to-value ratios and interest rates. Banks adjust lending conditions in line with EU pollution and biodiversity protection legislation, particularly for companies with large pollution footprints near biodiversity-protected areas or those contributing to Environmental Quality Standards failures of downstream surface waters.

The climate-biodiversity-pollution nexus: the pricing of environmental credit risks for European

12/09/2025 European Central Bank Central banks

This study examines how euro area banks factor pollution-induced biodiversity risks into lending decisions, using data from 832 banks and 5,000 major polluters. Our results show that banks are increasingly pricing these risks by adjusting loan-to-value ratios and interest rates. Banks adjust lending conditions in line with EU pollution and biodiversity protection legislation, particularly for companies with large pollution footprints near biodiversity-protected areas or those contributing to Environmental Quality Standards failures of downstream surface waters.

Update to lending and deposit spread of the Operational Standing Facility – Market Notice 8 December 2025

12/08/2025 Bank of England Central banks

In line with the Bank's transition to a repo-led, demand-driven operational framework for providing reserves, the Bank is today announcing a reduction in the spread to Bank Rate of the Operational Standing Facility (OSF). This Market Notice confirms the new, recalibrated spread of the OSF at Bank Rate +15bps for the lending facility and Bank Rate -15bps for the deposit facility. As with all SMF facilities, the OSFs are 'open for business' and should be used by SMF participants for the purposes of liquidity management.

Asset prices, wealth inequality, and welfare: safe assets as a solution

12/08/2025 European Central Bank Central banks

Can rising asset prices reduce wealth inequality? This paper builds a continuous-time heterogeneous-agent general equilibrium in which entrepreneurs hold risky private capital and traditional savers hold safe assets. Safe-asset expansions—via financial innovation, public debt, or a stable equity bubble—operate through a single pass-through: they lower entrepreneurs’ undiversified risk exposure, compress risk premia, and raise the interest rate.

Asset prices, wealth inequality, and welfare: safe assets as a solution

12/08/2025 European Central Bank Central banks

Can rising asset prices reduce wealth inequality? This paper builds a continuous-time heterogeneous-agent general equilibrium in which entrepreneurs hold risky private capital and traditional savers hold safe assets. Safe-asset expansions—via financial innovation, public debt, or a stable equity bubble—operate through a single pass-through: they lower entrepreneurs’ undiversified risk exposure, compress risk premia, and raise the interest rate.

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