Featured Product

    FSB Report Examines Work Done by Authorities to Address Climate Risks

    July 22, 2020

    FSB published a report that takes stock of financial authorities’ experience in including climate-related risks in financial stability monitoring. This report draws on information provided by FSB member national authorities, international bodies, and a workshop with the private sector. The stock-taking exercise finds that financial authorities vary in terms of whether—and to what degree—they consider climate-related risks as part of their financial stability monitoring. Nearly three-quarters of survey respondents consider, or are planning to consider, climate-related risks as part of their financial stability monitoring. Most authorities focus on the implications of changes in asset prices and credit quality while a minority of authorities consider the implications for underwriting, legal, liability, and operational risks.

    In some jurisdictions, climate-related risks are being integrated into micro-prudential supervision of banks and insurance firms (including via requirements for firms’ stress testing and disclosure). However, such work is generally at an early stage. Some authorities report having set out—or being in the process of setting out—their expectations about firms’ disclosure of climate-related risks. Most jurisdictions with disclosure requirements set out the type of information that firms are expected to disclose. While the scope and extent of information disclosure varies across entities and jurisdictions, these reporting components generally include climate-related risks to which a firm is exposed as well as measures it is taking to mitigate such risks. Such disclosure standards are usually based on the recommendations of the FSB Task Force on Climate-related Financial Disclosures, but this is not always the case. Some approaches to disclosure are non-mandatory, and involve authorities supporting industry-led or non-binding disclosure guidelines. Other authorities have adopted a "comply or explain" approach under which a firm is considered non-compliant if it does not disclose climate-related risks and fails to provide an adequate explanation. Yet other authorities specify a catalog of data items that firms need to disclose. Non-binding disclosure standards can also support the standardization of firms’ disclosures.

    The stock-take also finds that the consideration of climate-related credit and market risks faced by banks and insurers appears more advanced than that of other risks, or of risks faced by other types of financial institutions. Some financial authorities have quantified—or have work underway to quantify—climate-related risks. Such work is hindered by a lack of consistent data on financial exposures to climate risks and difficulties translating climate change outcomes into changes in those exposures. No approach to quantification provides a holistic assessment of climate-related risks to the global financial system. Some authorities have also integrated climate-related risks into their supervisory frameworks. For some authorities this has included setting expectations as to how financial institutions should monitor and manage climate-related financial risks, including how such risks should be integrated into their governance, strategy, and risk management. For example, some authorities report expecting insurers to consider climate risks, if material, in their own risk and solvency assessments (ORSA). Some insurance supervisors expect insurers in their jurisdictions to use similar scenario analysis to assess their climate-related exposures. These supervisors expressed such expectations through regulatory tools such as written guidance or supervisory statements. Among these insurers that assess climate risks using such scenario analysis, there is evidence that the majority cover only physical risks

    As the next step in light of the findings of this exercise, FSB will conduct further work by October 2020 to assess the channels through which physical and transition risks could impact the financial system and how they might interact. Focus will be given to the potential amplification mechanisms and cross-border effects and to prioritizing channels that could materialize in the short-to-medium term. FSB will also consider the scope for work to assess available data through which climate-related risks can be monitored as well as any data gaps.  This work will build on, and be coordinated with, that taking place in other relevant international fora.

     

    Related Links

    Keywords: International, Banking, Insurance, Securities, Climate Change Risk, ESG, Disclosures, Stress Testing, ORSA, Credit Risk, Operational Risk, FSB

    Featured Experts
    Related Articles
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News
    News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    CBE Issues Additional Measures to Ease Disruptions from Pandemic

    The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7868