JFSA Amends Guidelines for Banks, Issues Report on Sustainable Finance
The Financial Services Agency of Japan (JFSA) published draft amendments to the "comprehensive supervision guidelines for small- and medium-size and regional financial institutions," with the comment period ending on August 09, 2021. Additionally, JFSA finalized amendments to the "comprehensive supervision guidelines for major banks," which will be applicable from November 01, 2021. Also published was the feedback received on the draft guidelines for major banks. Additionally, the Expert Panel on Sustainable Finance, which JFSA had established in December 2020, published a report that summarizes key perspectives and cross-cutting issues on sustainable finance; the report highlights that broad discussion needs to be held on appropriate corporate disclosures regarding sustainability and notes the importance of this dialog among investors and financial institutions.
The key points highlighted in the report include the following:
- Following the revisions of the Corporate Governance Code (June 2021), the quality and quantity of climate-related disclosure should be enhanced based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations or an equivalent framework.
- Developing a “green international financial center” can contribute to more loans and investment towards sustainable societies in Asia and rest of the world. Institutional investors should enhance environmental, social, and governance (ESG) investments and engagement with investees. Asset managers should carefully explain the characteristics of an ESG-related investment trust at its establishment and distribution and be accountable for ESG aspects of the selected issues on an ongoing basis. JFSA should monitor asset managers in this regard.
- A platform can be developed for practical information of ESG-related bonds, including green bonds and a mechanism that provides objective certification of the eligibility of ESG-related bonds.
- Financial institutions need to support the transition of the real economy, integrating sustainability opportunities and risks into their business strategies and risk management. To support loan recipients and investees’ climate transition, financial institutions are expected to accumulate know-how, improve skills, and develop analytical tools. JFSA should continue to discuss with financial institutions the effective use of scenario analysis and encourage them to develop a risk management system for climate change.
Comment Due Date: August 09, 2021
Keywords: Asia Pacific, Japan, Banking, Securities, SME, Sustainable Finance, ESG, Climate Change Risk, Disclosures, Green Bonds, Transition Risk, TCFD Recommendation, JFSA
Featured Experts
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Previous Article
SARB to Revise Implementation Dates for Final Basel ReformsRelated Articles
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
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.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
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.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
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.
CBIRC Revises Measures on Corporate Governance Supervision
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.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
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.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
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.
FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
FSB Reports Assess NBFI Sector and Progress on LIBOR Transition
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.
