The chief executive of Italy’s largest lender has warned that incentivising banks to do more green lending poses a threat to financial stability, putting him at odds with policymakers and bankers who are pushing the idea.

Jean Pierre Mustier, chief executive of UniCredit and president of the European Banking Federation, said he opposed the introduction of a so-called “green-supporting factor” in Europe, whereby banks would have to hold less capital against loans that helped finance climate-friendly projects.

“We should not have a green supporting factor because it’s going to create risks in the balance sheet,” Mr Mustier said during an interview at the Financial Times Banking Summit in London.

Mr Mustier cited a recent decision by UniCredit to divest an offshore wind farm it took control of after it fell into financial difficulties. Had the bank been artificially rewarded for keeping such an investment, it might have chosen to hold on to the company, leaving it exposed if its problems worsened, he said.

The intervention from the UniCredit boss comes just days after the European Commission said it wanted to explore the introduction of incentives to encourage green investment in Europe. – Copyright The Financial Times Limited 2019