Featured Product

    OSFI Consults on Addressing Climate Risks in Financial Sector

    January 11, 2021

    OSFI published a discussion paper on climate-related risks that can affect the safety and soundness of federally regulated financial institutions (FRFIs) and pension plans (FRPPs). The discussion paper considers how climate-related risks can drive financial, operational, strategic, and reputation risks of federally regulated financial institutions and pension plans. The paper shares the OSFI insights on possible prudential tools for enhancing preparedness and resilience to these risks. This includes a discussion of the respective roles of capital requirements, the supervisory review process, and market discipline in promoting resilience to climate-related risks. OSFI welcomes comments on the discussion paper by April 12, 2021. OSFI also published remarks of the OSFI Superintendent Jeremy Rudin on technology and climate-related risks.

    The discussion paper identifies and categorizes climate-related risks and how these risks could impact the safety and soundness of federally regulated financial institutions and pension plans. It also sets out the ways in which federally regulated financial institutions could prepare for, and build resilience to, climate-related risks. The paper also the ongoing work of OSFI on climate-related risks. To promote federally regulated financial institution preparedness and resilience to climate-related risks, OSFI is exploring the role of the following:

    • Capital requirements—Exploring whether there are climate-related considerations beyond what is in the existing capital framework that should be considered.
    • Supervisory review process—Considering whether climate-related risks should be incorporated more specifically into guidance on risk assessment processes, such as Internal Capital Adequacy Assessment Process and Own Risk and Solvency Assessment, scenario analysis, and stress testing.
    • Market discipline—Reviewing the role climate-related financial disclosures can play in supporting the prudential oversight of climate-related risk management.

    The paper highlights that traditional risk management approaches and stress testing tools may not be sufficient for identifying and accounting for a federally regulated financial institution's climate related risk exposures due to the uncertain outlook and long-horizon of climate change. New, advanced, or adapted risk analysis tools—such as sophisticated climate modeling and climate specific scenario analysis—could help to identify and assess material climate-related risks. These tools can also be helpful in setting or evaluating climate-related risk strategy and/or stress testing resilience to economic shocks from climate change. Additionally, financial risk models can play an important role in assessing federally regulated financial institution's material risk exposures. For climate-related risks, financial modeling can present a challenge to federally regulated financial institutions in a number of ways: current assumptions may not capture the impact of climate-related risks on the future direction of the risk exposure; historical loss rates due to climate related risks are not currently available; and climate data available may be insufficient in granularity.


    Related Links

    Comment Due Date: April 12, 2021

    Keywords: Americas, Canada, Banking, Insurance, Climate Change Risk, ESG, Regulatory Capital, Stress Testing, Disclosures, OSFI

    Featured Experts
    Related Articles

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    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).

    September 26, 2022 WebPage Regulatory News

    EBA Launches EU-Wide Transparency Exercise in 2022

    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.

    September 23, 2022 WebPage Regulatory News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    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."

    September 22, 2022 WebPage Regulatory News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    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.

    September 21, 2022 WebPage Regulatory News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News

    ECB Further Reviews Costs and Benefits Associated with IReF

    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.

    September 15, 2022 WebPage Regulatory News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    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).

    September 15, 2022 WebPage Regulatory News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8521