BCB Amends Rules on Open Banking and Proposes ESG Disclosure Rules
BCB amended the resolution that establishes technical requirements and operational procedures for the implementation of open banking in Brazil, with the amended resolution entering into force on its publication date. BCB also proposed rules for the disclosure of information on social, environmental, and climate risks by institutions in the National Financial System (SFN), with the comment period ending on June 05, 2021. The consultation proposes for this new disclosure regulation to be in force on January 01, 2022. This proposal is one of the deliverables agreed under the Sustainability Dimension of the BCB institutional agenda and it will be implemented in two phases.
In the first phase, with respect to the qualitative aspects, the focus is on the disclosure of clear, consistent, and comparable information about governance, strategy, and management of social, environmental, and climate risks. The second phase, which is scheduled to be launched in 2022, will set the mandatory disclosure requirements for quantitative information (metrics and targets). However, institutions that already employ indicators for the social, environmental, and climate risk management have the option to disclose quantitative information in the first phase. The proposal reinforces the integration of social risk, environmental risk, and climate-related risk in the management of traditional financial risks, establishing specific rules for the identification, measurement, evaluation, monitoring, reporting, control, and mitigation of the adverse effects arising from interactions among all risks. Such rules include mechanisms for the treatment of social risk, environmental risk, and climate-related risk as material sources of credit risk, market risk, interest rate risk in the banking book, operational risk (including legal risk), and liquidity risk.
Building on the experience of the Pillar 3 standards in the Basel framework, information is required to be disclosed in a standardized “GRSAC Report,” consisting of templates that focus on each of the core elements in recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD): governance, strategy, risk management, and metrics and targets. The disclosures are in line with the size and risk profile of an institution and the new regulation will apply to institutions allocated to Segment 1 (S1), Segment 2 (S2), Segment 3 (S3), and Segment 4 (S4), as defined in Resolution CMN 4.5531, of January 30, 2017. The disclosure proposal is inspired by the TCFD recommendations of the but is not limited to a climate perspective. The proposal complements the ongoing consultation (No. 85/2021) on rules for the management of social, environmental, and climate risks by financial institutions. Disclosure of information for the social, environmental, and climate aspects by financial institutions is crucial for improving transparency, reducing information asymmetry, and improving market discipline in the National Financial System or SFN. The proposal has been issued in context of the Sustainability Dimension of the BCB Agenda, which acknowledges the relevance of social, environmental, and climate-related issues for the financial stability of Brazil..
Related Links (in English and Portuguese)
- News Release on Consultation
- Consultation Paper and Disclosure Templates (PDF)
- Resolution on Open Banking
Comment Due Date: June 05, 2021
Effective Date: Publication Date (Open Banking)
Keywords: Americas, Brazil, Banking, Open Banking, ESG, Climate Change Risk, TCFD Recommendations, Disclosures, Regtech, BCB
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