The Bank Negara Malaysia (BNM) proposed revisions to the guidelines on business continuity management for financial institutions, with the feedback period ending on March 31, 2022. The proposals aim to facilitate the development and implementation of a robust business continuity management framework, policies, and processes that are integrated with the overall risk appetite and reinforce sound risk management practices. The aim is to preserve the continuity of critical business functions and essential services within a specified timeframe in the event of an operational disruption. BNM also issued a summary of discussions at meeting of the Joint Committee on Climate Change and published the proposed requirements and guidance on climate risk management and scenario analysis. The feedback period on the consultation ends on March 31, 2022 and the final policy document is expected to come into effect on June 01, 2022, with certain exceptions.
Recognizing the characteristics of climate risks, the consultation on climate risk management sets out the principles and requirements on the management of climate-related risks by financial institutions, As per the consultation, financial institutions shall, among others,
- Ensure that the board and senior management exercise effective oversight of climate-related risks to safeguard the financial institution’s resilience against the adverse impact of climate change.
- Embed climate-related risks into their internal control frameworks across the three lines of defense to ensure the robust management of material climate-related risks.
- Embed climate risks into the risk appetite framework, including the potential long-term impact of these risks as drivers of existing types of material risks, and reflect these material risks in the internal capital adequacy assessment process.
- Integrate material climate risk considerations into their existing enterprise-wide risk management framework and support a reliable approach to identifying, measuring, monitoring, and controlling material risks.
- Continuously develop data capabilities, tools, and methodologies to effectively aggregate and report material climate risks and actively monitor and escalate material and potential climate risks, supported by appropriate data, risk analysis, and clear reporting procedures.
- Understand the transmission and impact of climate risks on the other existing risk types and ensure that their risk management systems and processes account for material climate-related risks.
- Produce reliable, meaningful, and comparable climate-related disclosures, to support informed decisions by stakeholders and reinforce the effective management of material climate-related risks in the financial sector.
- Employ scenario analysis to determine the resilience of their business strategies to material climate risks and insights from the scenario analyses shall inform the risk profile, risk appetite, and risk management framework.
With respect to scenario analysis and stress testing, BNM will provide additional guidance to the financial institutions in a forthcoming discussion paper on climate change stress test, with this consultation set to be released in the first quarter of 2022. Additionally, a Task Force on Climate-Related Financial Disclosures (TCFD)-aligned application guide for disclosures on climate-related risks by financial institutions is expected to be issued for public consultation in January 2022, as mentioned in the statement summarizing discussions at the meeting of the Joint Committee on Climate Change. The BNM-regulated financial institutions are expected to work toward adopting the stretch recommendations that are fully aligned with TCFD disclosures, by the end 2024. As an extension of this work, disclosure guides for businesses will be developed in 2022. The Joint Committee also plans to publish a detailed report in 2022, based on its various engagements and surveys, to explore opportunities and challenges for the financial industry to meaningfully support the climate transition.
- Exposure Draft on Business Continuity Management (PDF)
- Statement on Meeting of Joint Committee on Climate Change
- Notification on Exposure Draft on Climate Risk Management
- Exposure Draft on Climate Risk Management (PDF)
Comment Due Date: March 31, 2022 (Both Proposals)
Effective Date: June 01, 2022 (Climate Risk Guidance)
Keywords: Asia Pacific, Malaysia, Banking, Climate Change Risk, ESG, Disclosures, Reporting, Stress Testing, Scenario Analysis, TCFD, Sustainable Finance, Business Continuity, Operational Risk, Operational Resilience, BNM
The European Banking Authority (EBA) published its work program for 2023 as well as the technical package for phase 3 of version 3.2 of its reporting framework.
The Board of Governors of the Federal Reserve System (FED) announced a pilot climate scenario analysis exercise for six largest banks in the U.S.
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).