Featured Product

    MNB Issues Recommendation on Climate and Environmental Risks

    April 21, 2021

    MNB published the Recommendation No 47/2021. (IV. 14.) on climate and environmental risks for credit institutions. The Recommendation sets out the MNB expectations in relation to the identification, measurement, management, control, and disclosure of climate and environmental risks as well as to the integration of environmental sustainability considerations into the business activities of credit institutions. MNB expects credit institutions to mostly apply this Recommendation from June 01, 2021, with certain sections of the Recommendation becoming applicable from June 30, 2021.

    The following are the key highlights of the expectations set out in the Recommendation:

    • Supervisory expectations for integrating environmental sustainability considerations into business model and strategy. MNB expects credit institutions to identify the risks arising from climate change and environmental degradation at the level of key sectors, geographical areas, and in relation to the products and services in which they operate or plan to operate. MNB also expects credit institutions to identify and assess which climate and environmental risks are material to their business strategy in the short, medium, and long term, along with the resilience of their business strategy to these risks.
    • Supervisory expectations for internal governance. MNB expects the management body of the credit institutions to have adequate collective knowledge, skills, and experience with regard to the climate and environmental risks. MNB also expects that a separate organizational unit or function ("Environmental, Social, and Governance or ESG center” or dedicated “chief sustainability officer”) responsible for the management and control of climate change and environmental risks is established within the credit institution or a senior manager is designated under the management body in its supervisory function, responsible for the management and control of climate and environmental risks.
    • Supervisory expectations for risk management. MNB expects credit institutions to have a comprehensive and well-documented picture of the impact of climate and environmental risks on existing risk categories. Credit institutions are expected to develop appropriate risk indicators and set appropriate limits for climate and environmental risks. Credit institutions are also expected to monitor and disclose, where available, their policies for economic (sub)sectors, geographical exposures, and the current data on climate and environmental risk exposures, preferably in the form of quantitative measures. MNB has also set out its expectations with respect to management of credit, market, operational, and liquidity risks as well as expectations regarding the assessment of climate and environmental risks through the use of sensitivity, scenario analysis, or stress testing.
    • Supervisory expectations for disclosures. MNB expects credit institutions to start preparing for the new disclosure requirements under Article 8 of the Taxonomy Regulation and Article 449a of the Capital Requirements Regulation or CRR. Under Article 8 of the Taxonomy Regulation, companies and financial institutions subject to the non-financial reporting directive will be required, from January 01, 2022, to provide additional transparency on the extent to which their activities are considered environmentally sustainable. In addition, Article 449a of CRR requires large institutions with securities traded on a regulated market to disclose information on certain ESG risks after June 28, 2022.

    MNB expects credit institutions to conduct self-assessment, including a detailed gap analysis, in relation to the requirements detailed in this Recommendation. Based on the findings, the institutions are expected to develop an action plan to address the gaps and to submit this plan to MNB by September 30, 2021. Following an analysis of the submitted gap analysis, action plans, and prudential discussions, MNB will, after considering the EU legislative developments, set more detailed deadlines for the latest dates of compliance for the different expectations, which will be published in the context of the next revision of this Recommendation. MNB has also made available a “Knowledge Base” to help banks to comply with the supervisory Recommendation as soon as possible and to the greatest extent possible by presenting a collection of practical examples, good practices, available data sources, and methodologies.

     

    Effective Date: June 01, 2021/June 30, 2021

    Keywords: Europe, Hungary, Banking, Climate Change Risk, ESG, Sustainable Finance, Credit Risk, Market Risk, Operational Risk, Stress Testing, Disclosures, NFRD, Taxonomy Regulation, CRR, Recommendation, Recommendation 42/2021, Reporting, MNB

    Featured Experts
    Related Articles
    News

    APRA Issues Interim Update to Policy Priorities for 2021 and Beyond

    In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.

    September 24, 2021 WebPage Regulatory News
    News

    EBA Publishes Single Rulebook Q&A, Launches Transparency Exercise

    The European Banking Authority (EBA) published answers to 29 questions in the Single Rulebook Question and Answer (Q&A) tool in September.

    September 24, 2021 WebPage Regulatory News
    News

    EC Adopts Solvency II and Resolution Rules Package for Insurers

    The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.

    September 22, 2021 WebPage Regulatory News
    News

    OCC Issues Booklets on Regulatory Reporting and Earnings

    The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.

    September 22, 2021 WebPage Regulatory News
    News

    ECB Sets Out Results of Economy-Wide Climate Stress Tests

    The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.

    September 22, 2021 WebPage Regulatory News
    News

    EBA Examines Implications of Increasing Use of Digital Platforms in EU

    The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.

    September 21, 2021 WebPage Regulatory News
    News

    HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact

    The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.

    September 21, 2021 WebPage Regulatory News
    News

    ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures

    The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.

    September 21, 2021 WebPage Regulatory News
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7495