BCB Adds Sustainability Dimension to Its Agenda in September 2020
BCB added sustainability dimension to its agenda in September 2020. The new dimension aims to promote sustainable finance, management of socio-environmental and climatic risks in the national financial system, and integration of sustainable variables in the decision-making process. The key measures included in the sustainability dimension are related to supervision, regulation, partnerships, and socio-environmental responsibility. The BCB president also signed a memorandum of understanding with the Climate Bonds Initiative (CBI); the partnership aims to exchange information on the promotion of sustainable finance and management of socio-environmental and climatic risks in the financial sector.
The sustainability dimension of the Agenda involves the following key measures:
- Structuring and broadening of the scope for collecting information on socio-environmental risks. This involves creation of document to collect qualitative data on both socio-environmental responsibility and climate risk assessment carried out by financial institutions for selected operations. It also involves automation of crossing exposure data with public information related to socio-environmental risk.
- Monitoring of climate risks and stress tests. This involves inclusion of climate risk scenarios in new and improved stress tests performed by BCB, in line with international recommendations and best practices.
- Regulatory enhancement of Resolution No. 4.327/2014. This involves inclusion of the concept climate risk, improvement of the definition of socio-environmental risk, and inclusion of requirements applicable to all types of risk such as risk appetite statement, stress tests, and business continuity and governance plan.
- Better transparency based on Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Improvement of criteria for climate-related financial disclosures by financial institutions, focusing on the risks and opportunities related to climate-related issues, as well as studying specific aspect of TCFD recommendations that can be incorporated into the prudential regulatory framework of BCB.
- Creation of a "green liquidity facility." This involves a feasibility study, analysis, and subsequent implementation of new facilities for financial institutions, whose collaterals can be private credit operations or private securities.
- Management of international reserves. This covers inclusion of sustainability criteria for the selection of counterparties in the management of international reserves and for investment decisions.
- Joining of the Network for Greening the Financial System (NGFS). BCB joined NGFS to benefit from the exchange of experiences and best practices of central banks about socio-environmental issues, improvement in data analysis and mitigation of socio-environmental risks in the financial system, and strengthening of partnerships with other central banks and international organizations.
Related Links (in Portuguese)
Keywords: Americas, Brazil, Banking, ESG, Climate Change Risk, Climate Change Initiative, Climate Bonds Initiative, Stress Testing, NGFS, Sustainable Finance, Disclosures, TCFD, BCB
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
Previous Article
PRA Announces Update on Supervisory Benchmarking Portfolio ExerciseRelated Articles
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
EBA Publishes Single Rulebook Q&A Updates in February 2021
The EBA Single Rulebook question and answer (Q&A) tool updates for this month include answers to ten questions.
ESMA Releases Schema and Instructions for Securitization Reporting
ESMA updated the set of questions and answers (Q&A), along with the reporting instructions and an XML schema for the templates set out in the technical standards on disclosure requirements, under the Securitization Regulation.
EU Rule Amends Requirement for European Single Electronic Format
EU published Regulation 2021/337, which amends the Transparency Directive (2004/109/EC), regarding the use of the single electronic reporting format for annual financial reports.
HM Treasury Issues Report on Independent Review of UK Fintech Sector
HM Treasury published a report on independent review of the fintech sector in UK.
EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
