UK and Brazil Agree to Cooperate on Green Finance and Fintech
UK and Brazil held the fourth Economic and Financial Dialog between the two countries in December 2020. The participants included the central bank governors and the heads of financial sector regulators. Among other topics, the discussions centered on collaboration in the areas of green finance, financial technology and innovation, and insurance and capital markets. One of the key developments was the agreement of the UK and Brazil on the implementation of the UK-Brazil Green Finance program, to develop the Green Finance market in Brazil. To ensure follow-up across all the agreed areas, senior officials will meet to take stock in the first half of 2021, with the next Dialog expected to be held in Brazil in 2021.
The UK proposed that Brazil consider the possibility of joining the Coalition of Finance Ministers for Climate Action. As one of the main Program beneficiaries, the Brazilian National Development Bank (BNDES) will pioneer the integration of international ESG standards into its processes, policies, and mandates. Both countries welcomed engagement between the UK Green Finance Institute (GFI) and the multi-stakeholder forum Brazilian Financial Innovation Laboratory (LAB), which aims to foster sustainable finance through innovative financial instruments. Both countries committed to a series of technical engagements to work together on deliverables to advance the sustainable finance agenda in Brazil, including an industry roundtable in early 2021. The Central Bank of Brazil committed to implement mandatory climate-related disclosures for financial institutions aligned with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) by 2022. UK and Brazil agreed to enhance cooperation on the implementation of mandatory climate-related financial disclosures, ahead of COP26. They agreed on the need for a global approach to international climate-related disclosure standards to limit fragmentation across jurisdictions.
They also recognized the developing role of the IFRS and other international standard-setters in this regard. The UK welcomed the Brazilian central bank’s membership of the NGFS and the commitment to perform climate stress testing by 2022. The UK also encouraged Brazil to join the Coalition of Finance Ministers for Climate Action. The UK welcomes and supports SUSEP’s commitment to promote initiatives to implement TCFD recommendations in the insurance sector and offers technical assistance for the development of these initiatives. Finally, both sides agreed to work together to explore further measures to encourage financing growth, including through sustainable bonds, infrastructure investment, and local currency bonds. Both sides agreed to consider the feasibility of, and presence of any barriers to, dual listing of Brazil’s sovereign bonds in London, providing additional investor diversification and profile.
The two nations reinforced their commitment to collaborate on issues related to the development of the fintech ecosystem in the Brazilian and British markets. To this end, the UK and Brazil welcomed the planned workshop on Regulatory Sandboxes between the UK FCA, and the Central Bank of Brazil, the Securities and Exchange Commission, and Superintendence of Private Insurance; the workshop is expected to take place virtually in the first quarter of 2021. Both countries welcomed the Central Bank of Brazil’s interest in, and the Superintendence of Private Insurance’s intention of, joining the Global Financial Innovation Network (GFIN). They also welcomed the UK cooperation with the central bank of Brazil through the Support Open Banking Implementation Project. While the Brazilian Open Banking model will be implemented in four phases throughout 2021, general rules for the ecosystem and for its governance structure and technical standards for the first phase have already been issued. Brazil intends to move toward an Open Finance model by also including on its scope the sharing of data pertaining investment, insurance, foreign exchange, and open pension funds products and transactions.
Related Links
Keywords: Europe, Americas, UK, Brazil, Banking, Insurance, Securities, ESG, Sustainable Finance, Climate Change Risk, Disclosures, Stress Testing, Green Bonds, Fintech, Open Banking, COP26, BCB, HM Treasury
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Amnon Levy
Financial researcher; authority in credit portfolio management and AI/ML, risk-based pricing, climate and credit, CECL/IFRS 9; credit and ALM
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Previous Article
RBI Announces Regulatory Policy Measures in Context of PandemicRelated Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.
