["Business Strategy and the Environment, Volume 35, Issue 3, Page 3740-3759, March 2026. ", "\nABSTRACT\nThis study investigates capital resilience in relevance to the European deposit‐taking financial institutions in response to climate shocks, using the Dynamic Capabilities Theory as the conceptual framework. Employing a panel dataset, spanning the period 2012 to 2021, the analysis documents that climate risk negatively influences the capital position of EU financial institutions, with a more pronounced adverse effect observed on core capital. We integrate cultural dimensions, along with environmental drivers, as moderating variables to provide fresh and comprehensive perspectives on these dynamic ties. While the moderating role of environmental tax exhibits a marginally positive influence, mitigating the adverse impact of climate risk on capital positions, the synergistic effect of per capita greenhouse gas (GHG) emissions weakens the baseline association. National cultural dimensions reveal heterogeneous moderating influences on the relationship between climate risk and capital resilience across EU financial institutions. Given Europe's accelerated warming, which is occurring at twice the global average, this study emphasizes the importance of firms' dynamic capabilities to sense, seize, and transform in response to external shocks, particularly in relation to regulatory capital adequacy, offering both theoretical and managerial insights.\n"]