Featured Product

    MAS Consults on Guidelines for Management of Environmental Risk

    June 25, 2020

    MAS launched three consultations on the guidelines for management of environmental risk by banks, insurers, and asset managers. The guidelines, which were co-created with financial institutions and industry associations, set out the supervisory expectations of MAS for financial institutions in their governance, risk management, and disclosure of environmental risk. The comment period for these consultations ends on August 07, 2020. MAS also proposed to provide a transition period of 12 months after the guidelines are issued, for financial institutions to assess and implement the guidelines as appropriate to reflect the evolving nature and maturity of risk management practices.

    The guidelines are tailored to each sector based on the business activities and risk management practices. In the banking sector, the guidelines apply to all banks, merchant banks, and finance companies. MAS recognizes that the scale, scope, and business models of banks can be different. A bank should implement these guidelines in a way that is commensurate with the size and nature of its activities as well as its risk profile. MAS proposes to apply the guidelines to banks’ extension of credit to corporate customers and underwriting for capital market transactions. A bank should also apply the guidelines to other activities that expose it to material environmental risk. In particular, banks with material investment activities should refer to the relevant sections of the Guidelines on Environmental Risk Management for Asset Managers, for sound practices on the management of environmental risk with respect to investments. The following are the key highlights of the proposed guidelines for banks:  

    • Governance—MAS also proposes that the Board ensure that environmental risk, where material, is addressed in the bank’s risk appetite framework, so that environmental risk exposures beyond the bank’s risk appetite can be promptly recognized and addressed. MAS further proposes that where environmental risk is deemed material to a bank, the bank should designate a senior management member or a committee to oversee environmental risk.
    • Risk management—MAS proposes that banks should identify, assess, mitigate, and monitor material environmental risk at both the customer and portfolio levels. MAS also proposes for the bank to develop capabilities in scenario analysis and stress testing to assess the impact of environmental risk on its risk profile and business strategies, and explore its resilience to financial losses.
    • Disclosures—MAS proposes that a bank disclose, at least annually, its approach to managing environmental risk and the potential impact of material environmental risk on the bank. The latter includes quantitative metrics such as exposures to sectors with higher environmental risk. A bank’s disclosure may be consolidated at the group or head office level. MAS also proposes that banks take reference from international reporting frameworks, including the FSB’s Task Force on Climate-related Financial Disclosures (TCFD), to guide their environmental risk disclosures. The TCFD recommendations provide a useful framework for the disclosure of climate-related risks.

    The guidelines aim to enhance the resilience of financial institutions to environmental risk and to strengthen the role of the financial sector in supporting the transition to an environmentally sustainable economy, in Singapore and in the region. This is part of the Green Finance Action Plan of MAS to become a leading global center for green finance. The guidelines serve as a call to action for financial institutions to help drive the transition to an environmentally sustainable economy, by enhancing the integration of environmental risk considerations in financial institutions' financing and investment decisions and promoting new opportunities for green financing. 

     

    Comment Due Date: August 07, 2020

    Keywords: Asia Pacific, Singapore, Banking, Insurance, Securities, ESG, Governance, Disclosure, Green Finance Action Plan, Climate Change Risk, MAS

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    News

    FASB Proposes Improvements to 2023 GAAP Reporting Taxonomy

    The Financial Accounting Standards Board (FASB) is seeking comments, until November 03, 2022, on the proposed technical and other conforming improvements for the 2023 GAAP Financial Reporting Taxonomy.

    November 03, 2022 WebPage Regulatory News
    News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News
    News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8588