HKMA Develops Assessment Framework for Green and Sustainable Banking
HKMA published the finalized common assessment framework on green and sustainable banking in Hong Kong. The framework assesses the readiness and preparedness of an institution in addressing climate (both physical and transition) and environmental risks. HKMA intends to implement the assessment on about 50 authorized institutions based predominantly on their asset sizes and business activities. Selected authorized institutions will have 12 weeks to complete this initial round of assessment, taking into account the current COVID-19 situation.
The framework was developed with the support of a working group consisting of 22 authorized institutions. It will collect information about the stage of development with respect to climate risks and environmental risks under six key elements and 20 sub-elements:
- Governance, including board and senior management oversight and roles and responsibilities
- Corporate planning and tools, including strategic plan, business plan, financial plan, scenario analysis, and stress testing
- Risk management process, including identification, measurement, monitoring, reporting, and control and mitigation
- Business policies, products, and services, including lending and investment
- Performance and resources, including indicators, targets, staff capacity, and data collection and processing
- Disclosure and communication
These elements and sub-elements represent the major areas on which an institution would focus in addressing climate and environment-related risks and are usually found in the standards, initiatives, or recommendations of international bodies and regulators of other jurisdictions. The framework is intended to help authorized institutions formulate strategies and approaches and to inform the design of supervisory expectations and requirements under Phase II of the three-phased approach of HKMA to promote green and sustainable banking in Hong Kong.
Keywords: Asia Pacific, Hong Kong, Banking, Sustainable Finance, Climate Change Risk, ESG, Stress Testing, Disclosures, Governance, Reporting, Common Assessment Framework, HKMA
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
Related Articles
EBA Guide to Monitor Threshold for Intermediate Parent Undertakings
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
ESMA Group Issues Recommendations on RFR Switch in Interdealer Market
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
EC to Defer Application of SFDR Standards Till July 2022
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
EIOPA Consults on Reporting and Disclosures Under Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.
BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
EBA Seeks Views on Proportionality Assessment Methodology
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
