HKMA Develops Assessment Framework for Green and Sustainable Banking
HKMA published the finalized common assessment framework on green and sustainable banking in Hong Kong. The framework assesses the readiness and preparedness of an institution in addressing climate (both physical and transition) and environmental risks. HKMA intends to implement the assessment on about 50 authorized institutions based predominantly on their asset sizes and business activities. Selected authorized institutions will have 12 weeks to complete this initial round of assessment, taking into account the current COVID-19 situation.
The framework was developed with the support of a working group consisting of 22 authorized institutions. It will collect information about the stage of development with respect to climate risks and environmental risks under six key elements and 20 sub-elements:
- Governance, including board and senior management oversight and roles and responsibilities
- Corporate planning and tools, including strategic plan, business plan, financial plan, scenario analysis, and stress testing
- Risk management process, including identification, measurement, monitoring, reporting, and control and mitigation
- Business policies, products, and services, including lending and investment
- Performance and resources, including indicators, targets, staff capacity, and data collection and processing
- Disclosure and communication
These elements and sub-elements represent the major areas on which an institution would focus in addressing climate and environment-related risks and are usually found in the standards, initiatives, or recommendations of international bodies and regulators of other jurisdictions. The framework is intended to help authorized institutions formulate strategies and approaches and to inform the design of supervisory expectations and requirements under Phase II of the three-phased approach of HKMA to promote green and sustainable banking in Hong Kong.
Keywords: Asia Pacific, Hong Kong, Banking, Sustainable Finance, Climate Change Risk, ESG, Stress Testing, Disclosures, Governance, Reporting, Common Assessment Framework, HKMA
Featured Experts
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Related Articles
CFPB Finalizes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.
BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023
The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
US Congress Report Examines Data Privacy and Cybersecurity Regulations
The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
EU to Conduct One-Off Scenario Analysis to Assess Transition Risk
The European authorities recently made multiple announcements that impact the banking sector.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
