BCBS Issues Principles for Management and Supervision of Climate Risks
The Basel Committee on Banking Supervision (BCBS) issued consultation on principles for the effective management and supervision of climate-related financial risks, following the publication of a series of analytical reports this year. Through this consultation, BCBS seeks to promote a principles-based approach to improve banks' risk management practices and supervisory practices related to climate-related financial risks. The Committee intends to monitor implementation across member jurisdictions to promote a common understanding of expectations, support the development of harmonized practices, and facilitate implementation of the principles as soon as possible. The commend period on the consultation closes on February 16, 2022.
BCBS is taking a holistic approach to addressing climate-related financial risks to the global banking system and this includes the assessment and consideration of disclosure, supervisory, and regulatory measures. The 18 principles presented in the consultation seek to achieve a balance in providing a common baseline for internationally active banks and supervisors, while retaining sufficient flexibility given the evolving practices in this area. These principles span the following areas:
- Corporate governance
- Internal control framework
- Capital and liquidity adequacy
- Risk management process
- Management monitoring and reporting
- Comprehensive management of credit risk
- Comprehensive management of market, liquidity, operational, and other risks
- Scenario analysis
- Prudential regulatory and supervisory requirements for banks
- Responsibilities, powers, and functions of supervisors
The principles take into account the concept of proportionality. Specifically, with regard to scenario analysis, including stress testing, the principles are formulated with a view toward application to large, internationally active banks and to supervisory and other relevant financial authorities in Basel Committee member jurisdictions. However, smaller banks and authorities in all jurisdictions can benefit from a structured consideration of the potential impact of climate-related financial risks. BCBS welcomes feedback from all stakeholders, specifically on whether the principles appropriately capture the necessary requirements for the effective management of climate risks and the related supervision and if there are any aspects that the Committee could consider further or that would benefit from additional guidance. The Committee also seeks views on how the transmission of environmental risks to risk profiles of banks should be taken into account when considering the potential application of these principles to broader environmental risks in the future and what key aspects should be considered for this. Any comments on the individual principles and supporting commentary are also welcomed.
Related Links
Comment Due Date: February 16, 2022
Keywords: International, Banking, Climate Change Risk, ESG, Basel Framework, Credit Risk, Liquidity Risk, Reporting, Stress Testing, Scenario Analysis, Regulatory Capital, Operational Risk, Market Risk, BCBS
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

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
Previous Article
FPC Proposes Changes to O-SII Buffer Framework for BanksNext Article
DNB Publishes Several Reporting Updates for BanksRelated Articles
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.