BNM's Joint Committee on Climate Change, also known as JC3) met to discuss the progress in addressing climate change issues in the financial sector and to set priorities for the next twelve months. As part of the priorities, JC3 members committed to work toward wider adoption of the recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) and to advance concrete actions to pave the way for adoption of disclosure standards by the industry in the immediate future. JC3 members also agreed to take up, as part of its future work plan, the development of measures to help bridge gaps in climate and environment risk-related information needed to support risk management and product solutioning by financial service providers.
The four JC3 sub-committees are focused on risk management, governance and disclosure, product and innovation, and engagement and capacity building. The COVID-19 pandemic has brought to the fore the need to build resilience against climate and environmental risk events. In the backdrop of such ongoing developments, the JC3 meeting discussed the completed deliverables of its sub-committees during the year, along with the following future initiatives:
- BNM expects to publish, post consultation, a revised document on climate change and principles-based taxonomy as well as an additional guidance for implementation in early 2021. In parallel, 12 financial institutions that are members of the JC3 will participate in a pilot implementation of the taxonomy, which is scheduled to commence this month.
- JC3 members provided input on the development of reference documents on climate risk management and scenario analysis, which will be undertaken over the coming months to further strengthen risk management practices in the financial sector.
- Members discussed the results of an assessment conducted on climate-related disclosure practices across a sample of financial institutions in Malaysia, based on the recommendations of TCFD. Insights from the assessment will inform planned work on developing an application guide on climate-related disclosures, which will commence shortly as part of initiatives to improve the quality of disclosures.
- Financial participants noted paucity and fragmentation of information, gaps in technology knowledge, coordination issues, and low visibility on national strategies as the key challenges in addressing climate change risks. Initial views were shared on measures to address these market gaps and these measures will be further developed by the Product and Innovation sub-committee.
- Members agreed to further engage with institutional investors to identify opportunities in the development of products and services to address climate change and discussed plans to develop a more structured technical capacity building program for financial industry participants.
Related Link: Press Release
Keywords: Asia Pacific, Malaysia, Banking, Climate Change Risk, Sustainable Finance, Disclosures, Taxonomy, Stress Testing, BNM
Previous ArticleHKMA Revises Regulatory Framework for Supervision of Liquidity Risk
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
HM Treasury extended the consultation period on Phase II of the Future Regulatory Framework (FRF) Review, from January 19, 2021 to February 19, 2021.
The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system.
US Agencies (FDIC, FED, and OCC) issued a joint statement encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, to facilitate an orderly LIBOR transition.
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.