While speaking at an ISDA conference on EU Banking Reforms, Kerstin af Jochnick of ECB outlined how the ECB Banking Supervision is prioritizing its actions to address the challenges being faced in the banking sector. The priorities include deepening the European banking market, restoring profitability of banks, combating money laundering and terrorism financing, tackling IT and cyber risks, and addressing climate and environmental risks. When it comes to climate and environmental risks, the shared nature of the challenge and the urgent need to find solutions are, she believes, quite obvious.
Ms. Jochnick highlighted that, so far, banks have engaged with climate topics mostly by drawing up sustainability strategies that outline how they can reduce their impact on climate change and by pursuing other sustainability objectives. In future, though, banks will also need to adopt a more traditional risk management approach to understand how they are financially exposed to and affected by climate and environmental risks. Speaking about the actions being taken with respect to addressing the climate risks, she added that the ECB Banking Supervision is working through several international fora to define how climate-related risks should be integrated in both its own supervisory activities and in the risk management policies of banks. ECB will consult the public and the industry on this topic in the first half of this year. Later in the year, ECB intends to publish a guide setting out its supervisory expectations on the management and disclosure of climate-related risks. In addition to the work in the supervisory space, clarity is needed on the rules determining what constitutes a green investment. The taxonomy agreed by the European Parliament and the EU Council at the end of 2019 was a key step in this direction, enabling investors to identify environmentally sustainable economic activities that substantially contribute to climate change mitigation. By the end of December 2021, EC plans to define criteria for assessing whether an activity has a significant negative impact on sustainability.
Related Link: Speech
Keywords: Europe, EU, Banking, ESG, Climate Change Risk, Sustainable Finance, Taxonomy, ECB
Previous ArticleFCA Report Presents Key Lessons Learned from TechSprint
BCBS published the eighteenth progress report on implementation of the Basel III regulatory framework in member jurisdictions.
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.