The FSB Chair issued a letter to the G20 Finance Ministers and Central Bank Governors ahead of their July meeting. The letter is focused on issues such as the LIBOR transition, the need for post-pandemic reforms in the area of non-bank financial intermediation, and the need for coordinated action to address financial risks posed by climate change. Along with this letter, FSB has published a report on promoting climate-related disclosures, a report on gaps in data needed to monitor climate-related financial stability risks, and a roadmap for addressing climate-related financial risks.
The roadmap for addressing climate-related financial risks, which was prepared in consultation with the standard-setting bodies and other relevant international bodies, supports international coordination in several ways. The roadmap sets out the work underway and expected to be done by standard-setting bodies and other international organizations in the short and medium term in the following key interrelated areas:
- Firm-level disclosures as the basis for the pricing and management of climate-related financial risks at the level of individual entities and market participants
- Data in the context of use of consistent metrics and disclosures to diagnose climate-related vulnerabilities
- Vulnerability analysis to feed into the design and application of regulatory and supervisory frameworks and tools
- Regulatory and supervisory practices and tools that allow authorities to address identified climate-related risks to financial stability in an effective manner
The roadmap sets out indicative steps, along with the associated indicative timelines, for actions in each of the above-mentioned areas, though each step described to be taken is subject to the outcomes of necessary prior steps being satisfactorily achieved. The time horizon of the roadmap focuses most specifically on actions in the short and medium term (2021–2023), but also indicates the direction and goals of work beyond that time period. The roadmap will allow for flexibility, including across jurisdictions, as priorities will evolve over time. By September 2021, BCBS expects to deliver on development of proposals on the its role in global efforts related to climate disclosure. The roadmap indicates that NGFS will publish, by December 2021, a "How-to guide" for central banks’ climate-related financial disclosure to promote TCFD-aligned disclosure by central banks, allowing them to lead by example. Notably, the roadmap sets out the third quarter of 2022 as an indicative delivery timeline for the International Sustainability Standards Board (ISSB), under the IFRS Foundation, to publish final version of the new sustainability reporting standard (focusing initially on climate).
From 2022 onward, FSB, in coordination with the IFRS, IOSCO, and others, expects to report annually, to the G20, on progress in implementation by jurisdictions and firms of disclosures and reporting in line with the international standards. By October 2022, FSB expects to develop consistent metrics for use in climate-related vulnerabilities monitoring and identify data availability and gaps for metrics. NFGS expects to finalize its work on Climate and Environmental Risk Analysis Methodologies and Metrics in 2022. NGFS expects to follow up work on scenario design and regularly publish sets of reference scenarios, with milestones to be determined at the September 2022 NGFS Steering Committee meeting. IAIS expects to provide guidance on supervisory practices for stress testing and scenario analysis, with work expected to start in September 2021 and possible first deliverables expected in 2022. Following all these deliverables, June 2024 is the indicative timeline for work on development of supervisory macro-prudential tools if needed, either for individual sectors or at the cross-sectoral jurisdiction-wide level.
Keywords: International, Banking, Insurance, Securities, Climate Change Risk, ESG, Stress Testing, Disclosures, Reporting, Roadmap, Data Gaps, TCFD Recommendations, NGFS, BCBS, ISSB, IASB, G20, FSB
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.