Featured Product

    OSFI Announces Pilot Project on Climate Change Scenario Analysis

    November 16, 2020

    OSFI and the Bank of Canada announced a pilot project to use climate-change scenarios to better understand the financial system risks in the context of transition to a low-carbon economy. A small group of institutions from the banking and insurance sectors will participate voluntarily in the project and these institutions are Intact Financial, Manulife, Royal Bank of Canada, Sun Life Financial, TD Bank Group, and The Co-operators Group Limited. Early in 2021, OSFI plans to launch a discussion paper on preparing for, and building financial resilience to, climate-related risks.

    Scenario analysis is a useful tool for identifying potential risks in an environment of considerable uncertainty. Climate-change scenarios related to a transition to a low-carbon economy explore different pathways for emissions reductions—driven by changes in policy, technology, and consumer and investor preferences—and their implications for the economy and financial system. Building on the previous work on climate-change scenarios for the global economy, OSFI and the Bank of Canada will first develop a set of climate-change scenarios that are relevant for Canada. Using these scenarios, participants will explore the potential risk exposures of their balance sheets. The project aims to:

    • build the climate scenario analysis capability of authorities and financial institutions and support the Canadian financial sector in enhancing the disclosure of climate-related risks.
    • increase authorities’ and financial institutions’ understanding of the financial sector’s potential exposure to risks associated with a transition to a low-carbon economy.
    • improve authorities’ understanding of financial institutions’ governance and risk-management practices around climate-related risks and opportunities.

    OSFI and the Bank will publish a report, planned for the end of 2021, sharing details on the specific scenarios, methodology, assumptions, and key sensitivities. This project is not intended to serve as an assessment of individual financial institutions’ exposure to climate-related risks or the broader financial sector’s resilience to transition risks. Additionally, the selection of project participants is not an endorsement of their current approaches to the management or disclosure of climate risks. The climate-change scenarios to be developed for the project will build on the work conducted by researchers at the Bank of Canada, as presented in the discussion paper on scenario analysis that was published in May 2020. The OSFI work on climate-related risks focuses on potential impact on the financial soundness of individual banks, insurers, and private pension plans and on the stability of the financial system. OSFI is working with international counterparts as an active participant in the Sustainable Insurance Forum, a UN-sponsored grouping of financial regulators.

     

    Related Links

    Keywords: Americas, Canada, Banking, Insurance, Climate Change Risk, ESG, Climate Change Scenarios, Bank of Canada, OSFI

    Related Articles
    News

    EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio

    EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.

    November 19, 2020 WebPage Regulatory News
    News

    ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs

    In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.

    November 19, 2020 WebPage Regulatory News
    News

    IASB Begins First Phase of Post-Implementation Review of IFRS 9

    IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Report Examines Progress in Resolvability of Systemic Institutions

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.

    November 18, 2020 WebPage Regulatory News
    News

    EBA Benchmarks National Insolvency Frameworks Across EU

    EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Reports Assess Impact of Pandemic on Financial Stability

    FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.

    November 17, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Implementation of Capital Review Changes

    RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.

    November 17, 2020 WebPage Regulatory News
    News

    IASB Announces Andreas Barckow as the New Chair from July 2021

    The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.

    November 17, 2020 WebPage Regulatory News
    News

    HKMA Consults on Capital Rules for Bank Equity Investments in Funds

    HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.

    November 17, 2020 WebPage Regulatory News
    News

    ESRB Supports Extension of Macro-Prudential Measure by Swedish FSA

    ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).

    November 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6153