FINMA is consulting to amend the circulars on disclosure requirements for banks and insurers, to increase transparency with respect to the climate change risks. The consultation ends on January 19, 2021. To enhance transparency, FINMA is specifying the disclosure requirements for climate change risks for large financial market players. The more comprehensive and consistent disclosure of climate-related financial risks is intended to support an adequate analysis of these risks and to promote comparability and market discipline.
FINMA aims to achieve a proportionate and principle-based structuring of the climate risk disclosures. Institutions in categories 1 and 2—that is, systemically important banks and large insurance companies—are required to make their climate-related financial risks transparent. The regulatory approach of FINMA is based on the internationally recognized recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). As per the circular, the following principle-based elements should be covered and disclosed:
- Governance. Describe how the Board of Directors fulfils its oversight responsibilities in respect of the climate-related financial risks
- Strategy. Describe and identify the key climate-related financial risks (short-term, medium-term, and long-term risks) as well as their impact on business strategy, business model, and financial planning
- Risk management. Describe the risk management process for the identification, evaluation, and addressing of climate-related financial risks
- Quantitative information. Provide information on climate-related financial risks and the methodologies underpinning such information
For financial institutions, the repercussions of climate change can entail significant longer-term financial risks. In principle, financial institutions can build on their existing risk management systems. However, new developments in this sphere and new risk drivers in risk management must also be effectively identified and appropriately managed. In the area of disclosure of climate-related financial risks, FINMA has identified a targeted need for regulatory action in the balance sheets of its supervised entities and is setting out the corresponding regulatory details accordingly.
Related Links (in English and German)
- Press Release
- Draft Amendment to Circulars (PDF)
- Explanatory Report (PDF)
- Key Points Related to the Consultation (PDF)
Comment Due Date: January 19, 2021
Keywords: Europe, Switzerland, Banking, Insurance, Proportionality, Climate Change Risk, ESG, Governance, TCFD, Disclosures, FINMA
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Previous ArticleACPR Publishes Draft Version 1.0.0 of RUBA Taxonomy
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.