ECB Climate-Related Enforcement: Legal and Supervisory Implications for the 2026 SREP Cycle

As institutions enter the 2026 SREP cycle, the ECB is signaling a shift from remediation to enforcement in respect of unresolved climate-risk deficiencies. Following several years of supervisory expectations, thematic reviews, and climate stress testing, the ECB is focused on supervisory follow-through. The ECB’s first disclosed climate-related penalty illustrates how climate-risk expectations are now being translated into binding decisions supported by enforcement tools.

In November 2025, the ECB imposed a periodic penalty payment for failure to complete a climate-risk materiality assessment within four months. The decision followed the ECB’s established escalation framework: the articulation of supervisory expectations, identification of deficiencies through supervisory reviews and stress tests, the setting of remedial timelines, and ultimately enforcement where remediation remained outstanding. Unlike one-off fines, periodic penalty payments accrue on a daily basis after a notified remediation deadline until compliance is achieved or up to a maximum period of six months, reinforcing the operational and financial significance of missed supervisory deadlines and incentivising timely implementation of remedial measures.

Affected institutions can challenge enforcement decisions through the ECB’s internal review mechanism before the Administrative Board of Review (ABoR). In parallel, legal recourse is available before the Court of Justice of the European Union under Article 263 TFEU, although the thresholds for a successful challenge remain high. While ABoR review is optional and not a formal prerequisite for judicial proceedings, it can, if properly managed, be strategically useful to test legal arguments early, clarify the supervisory record, and refine the evidentiary basis for potential litigation before the Union courts.

Challenges are particularly complex where binding measures are rooted in soft-law expectations – such as ECB guidance or EBA guidelines – that are subsequently embedded in individual supervisory decisions. Demonstrating mandate overreach, procedural deficiencies, or violations of higher-ranking law in such cases requires early preservation of evidence, careful framing of objections, and a coordinated supervisory and litigation strategy across internal stakeholders.
Against this backdrop, institutions should consider adopting an integrated supervisory and legal approach, including:

•    closely tracking ECB-imposed deliverables and remediation deadlines and documenting compliance efforts and supervisory interactions;
•    assessing enforcement and litigation options at an early stage, including the strategic use of ABoR proceedings; and
•    maintaining constructive engagement with Joint Supervisory Teams to mitigate escalation while preserving legal positions.

As climate risk, digitalisation, and operational resilience remain key ECB priorities through 2027, climate-related enforcement should be treated as a near-term supervisory and legal risk rather than a theoretical concern. Banks facing ECB measures will increasingly need well-coordinated governance, compliance, and legal strategies to manage enforcement exposure effectively.