European regulators have been putting pressure on banks to factor in risks relating to climate change, from floods and droughts to a transition to new energy sources, in the way they do business.

The ECB said 16 banks, or 15% of those it assessed, were still falling short of the reporting standards, which include identifying any material exposure to climate risk, describing its impact on the bank's business and spelling out how it would deal with it. It did not disclose the banks' identities.

While this was an improvement from a year ago, when 45% of banks were coming up short, the ECB said lenders needed to make "further improvements" to meet the requirements, which come into effect in June, or face consequences.

"Further improvements are urgently needed," Frank Elderson, vice-chair of the ECB's Supervisory Board, said. "We will take the appropriate supervisory actions to ensure that banks comply."

Elderson has said previously that action could begin with naming the banks that fail to comply and could be escalated to include higher capital requirements or fines equal to 5% of a bank's daily turnover until the issue is resolved.

Banks have to make their first submission under the new rules by June 2023, with a fuller one due a year later.

The standards were set by the European Banking Authority (EBA), the European Union's main banking regulator.

Six banks were failing on all of the EBA's five reporting categories and only seven disclosed at least broadly adequate information in all five, the ECB said.

Among global banks, the ECB found that those with their parent company outside the European Union were performing worse than those controlled by a EU entity.

"Banks were informed of the outcome of the ECB's analysis of the shortcomings in their disclosures via individual feedback letters," the ECB said in the report. "Further supervisory investigations will target the soundness of banks' disclosures and how these align with their internal practices."

(Reporting by Francesco Canepa; Editing by Susan Fenton)