BNM Proposes Regulatory Sandbox Framework, Announces ASEAN Taxonomy V2
The Bank Negara Malaysia (BNM) published the financial stability review for the second half of 2022 and issued an exposure draft on the fintech regulatory sandbox framework. Additionally, the ASEAN Taxonomy Board, representing ASEAN finance sectoral bodies, released Version 2 of the ASEAN Taxonomy for Sustainable Finance.
The financial stability review highlights that market conditions have remained orderly despite the heightened volatility in domestic financial markets. The report suggests that sound risk management practices of financial institutions, coupled with their strong capital and liquidity buffers, will continue to preserve domestic financial stability. Latest stress tests conducted by BNM affirm the resilience of financial institutions against unexpected losses from severe macroeconomic and financial shocks. The report indicates that operational and cyber resilience remains a top priority for BNM and financial institutions amid the increase in digitalization and technology adoption in finance. Moreover, BNM will also continue working with financial institutions to strengthen climate risk management practices and support greater access to transition finance.
With respect to the Regulatory Sandbox Framework, BNM is seeking views, until May 30, 2023, on the proposals to issue a new Financial Technology Regulatory Sandbox Framework policy document, which contains enhancements to the policy document of the same name issued on October 18, 2016. The framework was first introduced in October 2016 to provide a regulatory environment that is conducive for the deployment of fintech and to facilitate meaningful innovation in the Malaysian financial sector. The proposed enhancements are focused at ensuring proportionate regulatory facilitation and improving operational efficiency of the existing sandbox procedures by
- simplifying the sandbox’s Stage 1 (eligibility) assessment, and
- introducing an Innovation Green Lane, which aims to provide a risk-proportionate and accelerated pathway for innovative solutions by financial institutions with strong risk management capabilities.
The Version 2 of ASEAN Taxonomy for Sustainable Finance consists of the complete foundation framework comprising detailed methodologies for assessing economic activities and Technical Screening Criteria (TSC) for the first focus sector—that is, Energy sector under the Plus Standard. With the release of Version 2, the ASEAN Taxonomy Board demonstrates its commitment to providing stakeholders with a common framework that is science-based, while being inclusive and catering to the different development stages of ASEAN member states. Following the release of Version 2, the Board will hold targeted consultations with key stakeholders on the assessment methodology as well as the metrics and TSC for the Energy sector under the Plus Standard. Following these consultations, the Board intends to finalize the TSC for the Energy sector in early 2024. TSCs for the remaining five focus sectors—Agriculture, forestry and fishing; manufacturing; transportation and storage; water supply, sewerage and waste management; and construction and real estate—covered under the Plus Standard will be released in phases, with TSC for all six focus sectors finalized by 2025.
Related Links
Keywords: Asia Pacific, Malaysia, Banking, Financial Stability Review, Basel, Climate Change Risk, ESG, Asean Taxonomy, Regtech, Regulatory Sandbox, Fintech, Sustainable Finance, Taxonomy, BNM
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Hasan Cerhozi
Hasan leads Moody’s Analytics ESG methodology development. He is expert on carbon transition, nature related risks and is a guest lecturer at ESSEC Business school on sustainable finance.
Previous Article
UK Updates Green Finance Strategy, Proposes ESG Ratings RegimeRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.