The Bank for International Settlements (BIS) recently published reports that investigate different aspects of the global regulatory and financial landscape. One of these reports discusses a study that explores building portfolios with decreasing carbon footprint, which passive investors can use as new Paris-consistent benchmarks and have the same risk-adjusted returns as business as usual benchmarks. The results show that reducing the carbon footprint of the portfolio by 64% in 10 years would be obtained by excluding sequentially up to 11% of the corporates, which together amount to less than 6% of the global market portfolio. While this reallocation preserves regional and sectoral exposures similar to those of the business-as-usual benchmark, it does not change its risk-adjusted return.
The following are the key highlights of the other reports:
The report from the Irving Fisher Committee on Central Bank Statistics (IFC) summarizes the results of a survey conducted on sustainable finance statistics among its members (with 63 answers, providing detailed information for 28 advance economies and 31 emerging market economies). The objective was to identify related data needs, availability, and gaps from the perspective of the central banking community, in close coordination with other international statistical initiatives. A key finding is that statistics on sustainable finance are of growing interest to central banks in pursuing their core mandates—that is, micro- and macro-prudential supervision, asset and reserve management activities, and the conduct of monetary policy. The findings of the survey also point to three main recommendations for central banks: intensify the identification of sustainable finance data needs to pursue their policy objectives; cooperate with traditional and new stakeholders to close data gaps, especially at the micro level; and lead by example by improving the usage of the new data being collected.
- The Financial Stability Institute (FSI) Insights report examines the progress emerging market economies have made in enhancing their crisis management frameworks. The paper notes that, despite the substantial progress, challenges remain regarding the strategies authorities may apply to resolve a crisis and how to fund it. The analysis shows that authorities may increase their options to manage banking crises if frameworks are enhanced to facilitate the use of transfer and recapitalization tools and, importantly, secure broader sources of funding. While this will mitigate risks for public finances, it does not eliminate the need for public backstops. The key is to maximize recoveries if backstops are used. The paper also proposes ways to reduce the cost of crisis management by planning and increasing crisis preparedness.
- The Committee on Payments and Market Infrastructures (CPMI) report reviews recent developments in retail fast payment systems, based on a survey of BIS CPMI member jurisdictions. The report highlights that global implementation of fast payments is continuing at a rapid pace; the fast payment systems are increasingly settling obligations between banks and, where relevant, non-bank fast payment system participants on a gross (that is, payment-by-payment) basis in real time. Most jurisdictions have either adopted or are moving toward ISO 20022 as the messaging format for their fast payment systems and, while differences in approaches remain, central banks tend to play important roles in facilitating the operations of fast payment systems. The report also highlights that designing, implementing, and operating a fast payment system is complex. Challenges include ensuring high system availability (for example, during nights and weekends) and reliability requirements.
- Report on Benchmarks Portfolios
- Report on Sustainable Finance Data
- Report on Crisis Management
- Report on Payment System Developments
Keywords: International, Banking, Cross-Border Payments, ESG, Sustainable Finance, Carbon Footprint, Low Carbon Benchmarks, Paris Agreement, Resolution Framework, Crisis Management Framework, CPMI, FSI, IFC, BIS
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The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.
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The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.