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
Previous ArticleACPR Publishes Draft Version 1.0.0 of RUBA Taxonomy
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.