Featured Product

    FSB Consults on Supervisory and Regulatory Approaches to Climate Risk

    The Financial Stability Board (FSB) is seeking comments, June 30, 2022, on a report with the aim to assist supervisory and regulatory authorities in developing their approaches to monitor, manage, and mitigate climate-related risks.

    The report focuses on cross-sectoral and system-wide aspects of climate-related financial risks and complements the standard-setting bodies’ ongoing work on approaches to address these risks. The report puts forward an early view on the need for tools and policies to sufficiently address systemic risks arising from climate change. The report examines the extent to which the existing policies and tools address all or parts of climate-related risks and contains an Annex that briefly explains approaches of selected authorities for gathering information from financial institutions on climate-related risks. FSB is inviting comments on the recommendations set out in the following three focus areas and includes a set of questions for this purpose:

    • Reporting and data collection. Keeping in mind the challenges related to the lack of sufficiently consistent, comparable, granular, and reliable climate data reporting by financial institutions, the recommendations address identification of information needs of authorities, strengthening of the reliability of data by supervisory oversight on governance, processes, and controls of financial institutions, use of common definitions across jurisdictions and sectors, and global coordination toward common regulatory reporting frameworks.
    • System-wide supervisory and regulatory approaches. Supervisory and regulatory risk assessments and policies need to better incorporate understanding of the channels for how climate risks to financial institutions may be transferred across sectors or borders. A system-wide approach  would draw on the elements of existing prudential frameworks, including supervisory review and evaluation processes; use of risk analytical tools such as scenario analysis and stress testing exercises; supervisory actions to address deficiencies in management of climate risks; and macro-prudential tools and policies to address systemic risks. The report includes recommendations on the way the authorities should account for the potential widespread impact of climate risks across the financial system, including expanding the use of climate scenario analysis and stress testing exercises. One of the recommendations is that future exercises should consider the range of financial risks beyond credit and market risks, to the extent they pose material risks, such as liquidity and insurance (underwriting) risks, which could be important to assessing the resilience of sectors across the financial system and address their interconnectedness. 
    • Macro-prudential policies and tools. The report presents the early thinking from standard-setting bodies and authorities on macro-prudential policies and tools that could complement micro-prudential measures and trade-off considerations. The report recommends authorities and standard-setting bodies to undertake research and analysis in the near to medium term on appropriate enhancements to their regulatory and supervisory frameworks.

    These three areas taken together inform how the use of climate scenario analysis and stress tests can be expanded to incorporate systemic risks that arise from climate change and to better inform a macroprudential perspective of risks across financial sectors and jurisdictions. The  report has been developed as part of the FSB Roadmap for Addressing Climate-related Financial Risks (published in 2021). FSB plans to incorporate feedback from this consultation and then publish the final recommendations in the fourth quarter of 2022.

     

    Related Links

     

    Keywords: International, Banking, Insurance, Securities, Basel, ESG, Climate Change Risk, Disclosures, Reporting, Systemic Risk, Prudential Framework, Scenario Analysis, Stress Testing, Macro-Prudential Policy, FSB

    Featured Experts
    Related Articles
    News

    BIS and Central Banks Experiment with GenAI to Assess Climate Risks

    A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe

    March 20, 2024 WebPage Regulatory News
    News

    Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures

    Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.

    March 18, 2024 WebPage Regulatory News
    News

    Singapore to Mandate Climate Disclosures from FY2025

    Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies

    March 18, 2024 WebPage Regulatory News
    News

    SEC Finalizes Climate-Related Disclosures Rule

    The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.

    March 07, 2024 WebPage Regulatory News
    News

    EBA Proposes Standards Related to Standardized Credit Risk Approach

    The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU

    March 05, 2024 WebPage Regulatory News
    News

    US Regulators Release Stress Test Scenarios for Banks

    The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

    February 28, 2024 WebPage Regulatory News
    News

    Asian Governments Aim for Interoperability in AI Governance Frameworks

    The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.

    February 28, 2024 WebPage Regulatory News
    News

    EBA Proposes Operational Risk Standards Under Final Basel III Package

    The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.

    February 26, 2024 WebPage Regulatory News
    News

    EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS

    The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.

    February 23, 2024 WebPage Regulatory News
    News

    ECB to Expand Climate Change Work in 2024-2025

    Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.

    February 23, 2024 WebPage Regulatory News
    RESULTS 1 - 10 OF 8957