The Central Bank of Philippines (BSP) issued an update related to the integration of sustainability principles in the investment activities of banks, published a circular on the domestic systemically important bank (D-SIB) framework, released a guidance paper on the conduct of institutional risk assessment (IRA), and issued a statement requesting financial institutions to adopt measures against cyber attacks.
Below are the key highlights of these recent updates:
- BSP announced that it is now in its third phase of sustainability-related regulations, with the recent release of draft guidelines on the integration of sustainability principles in investment activities of banks. The finalization of this policy proposal is targeted for August 2022. The first and second phases were marked by issuances of the Sustainable Finance Framework in April 2020 and the Environmental and the Social Risk Management Framework in October 2021. These regulations set out the expectations on the integration of sustainability principles in banks’ core strategies, governance, and risk management frameworks, especially in the areas of credit and operational risks. BSP specified that it will enhance its data collection tools to facilitate the assessment of climate- and other environment-related financial impact. It will also supplement the existing regulations on stress testing with guidelines that integrate climate stress testing design. Moreover, BSP is looking into potential regulatory incentives to further mainstream sustainable finance. BSP will soon release its 11-point strategy to implement the Sustainable Central Banking Program.
- BSP published a circular on amendments to the framework for dealing with D-SIBs. The circular states that the list of D-SIBs shall be assessed or determined annually based on the latest available data submitted by each bank and shall be subject to approval of the Monetary Board. The results shall be released annually. Banks identified as D-SIBs shall be informed individually, including the bucket they belong to and the individual score for each indicator. The circular shall take effect immediately after its publication in the Official Gazette or in a newspaper of general circulation.
- BSP published a guidance paper on the conduct of institutional risk assessment. The guidance paper provides practicable insights in the conduct of the institutional risk assessment to achieve optimal results that will inform risk-driven approach in the design and implementation of preventive measures to detect and mitigate money laundering, terrorist financing, proliferation financing, and sanctions risks. The guidance paper sets out the regulatory expectations and provides practical guidance and insights to assist financial institutions in the conduct of their institutional risk assessment, considering existing regulations, relevant international standards, and industry best practices. It presents a general approach that is flexible and can be tailored fit to the nature and complexity of financial institutions’ activities and operations, including those with simple business models.
- BSP has requested supervised financial institutions to adopt robust control measures against cyber fraud and attacks on retail electronic payments and financial services. BSP highlights that financial institutions should regularly conduct risk assessments of their product features, business rules, as well as application controls, and enforce appropriate enhancements and mitigation measures. BSP also encourages collaboration among financial institutions and the use of information sharing platforms such as the Bankers Association of the Philippines’ Cyber Incident Database, to expedite fraud investigations and recovery of funds, and proactively address emerging fraud schemes. In March 2022, BSP published a memorandum which recommends control measures against cyber fraud and attacks on retail electronic payments and financial services.
- Press Release on Guidelines on Integration of Sustainability Principles
- Circular on Guidelines on Integration of Sustainability Principles (PDF)
- Notification on Circular on D-SIBs
- Circular on D-SIBs (PDF)
- Notification on Institutional Risk Assessment
- Guidance Paper on Institutional Risk Assessment (PDF)
- Press Release on Measures Against Cyber Attacks
Keywords: Asia Pacific, Philippines, Banking, Basel, Sustainable Finance, ESG, Climate Change Risk, D-SIBs, Institutional Risk Assessment, Cyber Risk, ML TF Risk, BSP
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.
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