BCB proposed standards that define the sustainability criteria applicable to the granting of rural credit and the characterization of enterprises with restrictions on access to rural credit due to legal or non-legal provisions related to socio-environmental issues. This consultation constitutes the first initiative that is part of the BCB Agenda on sustainable finance (launched last year) and the comment period for this consultation closes on April 23, 2021.
The proposal clarifies that the application of sustainability criteria will result in the following categorization of projects:
- Projects that cannot be financed with rural credit, due to the existence of legal provisions that prevent granting of financing.
- Projects that may be financed with rural credit, with a signal to financial institutions that the operation represents socio-environmental risk; these projects shall not be classified as sustainable operations.
- Projects that may receive the classification of sustainable operation, due to compliance with socio-environmental sustainability parameters, such as low-carbon agriculture, water supply, or use of renewable energy generated on the property.
These criteria will be part of the Rural Credit and Proagro (Sicor) Operations System and will help financial institutions improve their socio-environmental risk assessment processes. The information related to sustainable operations may be used by other financial institutions, certifiers of sustainable credit securities, rating agencies specialized in ESG criteria, and contracted service providers to audit the adherence of ventures to socio-environmental requirements, to allow the issuance of green bonds. In addition, agricultural policy makers might also use the information to grant additional incentives to sustainable rural enterprises.
Related Links (in Portuguese)
Comment Due Date: April 23, 2021
Keywords: Americas, Brazil, Banking, Sustainable Finance, Rural Credit, Credit Risk, ESG, BCB
Previous ArticleACPR Launches Test Environment for New Data Collection Application
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.