DNB Consults on Integration of Climate Risk Considerations for Banks
DNB launched a consultation on the good practices for integration of climate-related risk considerations into risk management of banks. The consultation, which ends on January 17, 2020, seeks views on whether the practices are sufficiently clear and whether they provide banks with practical guidance for further integration of climate-related risks into their governance, risk management, and disclosures. The document also includes a set of questions and answers on the DNB interpretation of current regulations in relation to the treatment of climate-related risks. The final version of the good practices will be published in the first quarter of 2020.
The document first demonstrates how climate change can be a driver of conventional risk types, such as credit, market, and operational risks. It then explains the applicable legislation and regulations. Incorporation of climate risks in the risk management of banks is in line with the Capital Requirements Directive (CRD) IV. Article 74 of CRD IV stipulates that banks must have in place robust governance arrangements, including effective processes to identify, manage, monitor, and report the risks to which they are or might be exposed to. Given the potential impact of climate-related risks on banks' balance sheets, DNB expects banks to take climate-related risks into account in their risk management. They could do this by, among others, identifying the impact of these risks on their overall risk profile.
The proposed good practices provide non-binding guidance on how banks can organize their processes, procedures, and policies to manage the climate-related risks of their activities. This non-binding guidance is based on observed or envisaged practices that reflect an appropriate application of the applicable legislation and regulation to which this good practice document pertains. By adopting the good practices in a manner proportionate to their nature and scale, banks will become more resilient to the financial risks from climate change. These good practices are based on principal findings from the DNB analysis of the climate risk self-assessments submitted by Dutch less significant institutions and other market observations made through the work of DNB in this area.
Related Links
Comment Due Date: January 17, 2020
Keywords: Europe, Netherlands, Banking, CRD IV, Operational Risk, Market Risk, Climate Related Risks, Credit Risk, Guidance, ESG, Sustainable Finance, Disclosures, DNB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
EBA Single Rulebook Q&A: First Update for November 2019Next Article
DNB Publishes Insurance Newsletter for November 2019Related Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
