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This paper is a study of the likely changes to credit risk for commercial banks once
stricter environmental standards are imposed on the steel industry. It was undertaken by the
Industrial and Commercial Bank of China (ICBC) in cooperation with China Lianhe Equator
Environmental Impact Assessment Co., Ltd. and China-ASEAN Environmental Cooperation
Center. This project considered stress scenarios and stress transfers. In analyzing stress transfers,
firms were divided into small- and medium-sized enterprises (SMEs) and large enterprises.
In researching stress factors, pollution treatment and pollution discharge were considered.
Pollution treatment was studied for three processes – sintering, iron making and steel making.
Pollution emissions ware split into gas emissions and solid waste. This study found that stricter
environmental standards will impact the solvency of steel companies to an extent but the overall
risk can be controlled. This paper also puts forward some policy suggestions.