FINMA Consults on Climate Risk Disclosures for Banks and Insurers
FINMA is consulting to amend the circulars on disclosure requirements for banks and insurers, to increase transparency with respect to the climate change risks. The consultation ends on January 19, 2021. To enhance transparency, FINMA is specifying the disclosure requirements for climate change risks for large financial market players. The more comprehensive and consistent disclosure of climate-related financial risks is intended to support an adequate analysis of these risks and to promote comparability and market discipline.
FINMA aims to achieve a proportionate and principle-based structuring of the climate risk disclosures. Institutions in categories 1 and 2—that is, systemically important banks and large insurance companies—are required to make their climate-related financial risks transparent. The regulatory approach of FINMA is based on the internationally recognized recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). As per the circular, the following principle-based elements should be covered and disclosed:
- Governance. Describe how the Board of Directors fulfils its oversight responsibilities in respect of the climate-related financial risks
- Strategy. Describe and identify the key climate-related financial risks (short-term, medium-term, and long-term risks) as well as their impact on business strategy, business model, and financial planning
- Risk management. Describe the risk management process for the identification, evaluation, and addressing of climate-related financial risks
- Quantitative information. Provide information on climate-related financial risks and the methodologies underpinning such information
For financial institutions, the repercussions of climate change can entail significant longer-term financial risks. In principle, financial institutions can build on their existing risk management systems. However, new developments in this sphere and new risk drivers in risk management must also be effectively identified and appropriately managed. In the area of disclosure of climate-related financial risks, FINMA has identified a targeted need for regulatory action in the balance sheets of its supervised entities and is setting out the corresponding regulatory details accordingly.
Related Links (in English and German)
- Press Release
- Draft Amendment to Circulars (PDF)
- Explanatory Report (PDF)
- Key Points Related to the Consultation (PDF)
Comment Due Date: January 19, 2021
Keywords: Europe, Switzerland, Banking, Insurance, Proportionality, Climate Change Risk, ESG, Governance, TCFD, Disclosures, FINMA
Previous Article
ACPR Publishes Draft Version 1.0.0 of RUBA TaxonomyRelated Articles
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
HKMA Endorses Industry Guidance to Support LIBOR Transition
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
OCC Issues Booklet on Supervision of Problem Banks
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.
MAS Consults on Capital and Reporting Requirements for Market Risk
The Monetary Authority of Singapore (MAS) launched a consultation on the standards for market risk capital and the associated reporting requirements for banks incorporated in Singapore.
FDIC Announces Winners of Tech Sprint to Reach Unbanked Consumers
The tech lab of the Federal Deposit Insurance Corporation (FDIC) selected three winning teams in a tech sprint designed to explore new technologies and techniques to help banks meet the needs of unbanked consumers.
PRA Letter Sets Out Findings on Reliability of Regulatory Reporting
PRA published a "Dear CEO" letter that sets out findings of a review on the reliability of regulatory reporting and reiterates the supervisory expectations on regulatory reporting.
APRA Connect to Go Live; APRA to Reduce Reliance on CLF
The Australian Prudential Regulation Authority (APRA) confirmed that its new data collection solution APRA Connect will go live on September 13, 2021.
