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ECONOMIC-LEGAL REGULATION OF BANK LIQUIDITY IN THE CONTEXT OF ENVIRONMENTAL AND CLIMATE CHANGE
Abstract
The article highlights the critical role of liquidity management in banks and underscores the need for legislative-level changes in regulation and the assessment of climate risks in banks to achieve financial stability. Banks face growing expectations from regulators and society to integrate environmental, social, and governance (ESG) criteria into their business practices, as well as strengthen liquidity and control over climate risks. The article highlights the importance of prioritising the correct regulation of climate risks and liquidity for central banks and financial regulators, particularly in times of unstable geopolitical situations. The priority of such a task should be comprehensive, encompassing stress testing, the creation of a digital platform for climate data, the development of new methodologies for risk assessment and financial products that are resilient to climate change, and increasing the transparency and openness of stress testing results. The purpose of this article is to examine the current state of legal regulation of climate risks and liquidity risks in the European banking system and to outline the primary directions for improving regulation to ensure the stability of the financial system. The current legal framework for assessing climate risks and liquidity risks in the banking system is analysed. New directions in strategic banking regulation, in the context of climate risks, are identified. Proposed steps are necessary to ensure the banking sector's contribution to sustainable economic growth. In this regard, it has been proven that cooperation among banking institutions, regulators, and scientific institutions can create synergy to ensure the stability and sustainable liquidity of banking institutions. The need for implementing special climate stress scenarios and modelling climate risks is identified. When writing the article, system-functional, dialectical, formal-legal, comparative, and analytical methods were primarily employed.
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References14
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