Featured Product

    APRA Proposes Guidance on Managing Financial Risks of Climate Change

    April 22, 2021

    APRA launched a consultation on the Prudential Practice Guide for the management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees. The guidance covers views of APRA on sound practices in areas such as governance, risk management, scenario analysis, and disclosure. CPG 229 is aligned with the recommendations from the FSB Task Force on Climate-related Financial Disclosures (TCFD) and was developed in consultation with both domestic and international peer regulators. The comment period for this consultation will end on July 31, 2021 and the final guide is expected to be released before the end of 2021.

    APRA has developed this practice guide in response to requests from industry for greater clarity of regulatory expectations and examples of better industry practices. The proposed guide aims to assist an APRA-regulated institution in complying with the CPS 220 and SPS 220 on Risk Management as well as CPS 510 and SPS 510 on Governance. Subject to meeting the requirements of the prudential standards, an APRA-regulated institution has the flexibility to configure its approach to climate risk management in a manner best suited to achieving its business objectives. APRA expects the implementation of the guidance proposed in CPG 229 to reflect an entity’s size, business mix, and complexity, noting that concentrations in a particular market, sector, or geographic location may expose an entity to more material climate risks. In CPG 229, APRA proposes practices in the following areas in the management of climate change financial risks:

    • Identify and measure risks, including those in high exposure sectors, to understand potential impact on business model
    • Monitor risks through regularly updated qualitative and quantitative metrics
    • Evidence plans to manage risks through mitigation plans, including through engaging customers and counterparties
    • Report relevant information to board and senior management and consider external market disclosures
    • Consider scenario analysis to inform understanding of long-term risks and opportunities

    Scenario analysis is an area where APRA sees a wide range of capabilities and practices. APRA is undertaking a climate vulnerability assessment involving largest banks in Australia; the assessment will involve climate scenario analysis in line with the expectations outlined in the draft guide. Overall, the draft guide does not create new requirements or obligations and is designed to assist entities to consider climate risks and opportunities in their existing risk management frameworks and to support well-informed decision-making. 

     

    Related Links

    Comment Due Date: July 31, 2021

    Keywords: Asia Pacific, Australia, Banking, Climate Change Risk, ESG, Governance, Disclosures, Scenario Analysis, CPG 229, Climate Vulnerability Assessments, TCFD, Stress Testing, Reporting, APRA

    Featured Experts
    Related Articles
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    EIOPA Consults on Reporting and Disclosures Under Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7295