Her Majesty's (HM) Treasury issued a statement on the inaugural meeting of Brazil-UK Financial Markets Dialog, which was established at the 4th Economic and Financial Dialog in December 2020, to deepen bilateral ties in the financial sector. The Dialog mostly focused on four themes: sustainable finance, insurance, asset management and credit markets, and capital markets. Brazilian and UK participants shared views on the relevant issues in their respective areas of responsibility and updated one another on key policy and workstream developments. Both sides agreed to continue to engage bilaterally on the aforementioned focus areas in the coming months, in the run up to the next Economic and Financial Dialog.
Participants discussed progress on the sustainable finance agenda and shared updates on domestic effort to tackle climate-related financial risks. HM Treasury noted the Chancellor’s recent announcements to implement economy-wide Sustainability Disclosure Requirements and develop Sustainable Investment Labels. The Bank of England highlighted the importance of coordinated efforts on sustainable finance through multilateral fora such as the G20 and the Financial Stability Board. The Financial Conduct Authority provided updates on the UK’s domestic and international work on climate-related disclosures through the Financial Stability Board and International Organization of Securities Commissions. The Brazilian Economy Ministry provided updates on their Green Rural Product Certificate. This financial instrument aims to provide a mechanism for carbon offset and compliance with the environment, social, and governance (ESG) targets by the voluntary market. The Central Bank of Brazil highlighted their new ESG regulation for Brazilian financial institutions, strengthening the disclosure of information on social, environmental, and climate-related risks and opportunities. Both sides reaffirmed their commitment to the sustainable finance agenda and agreed to continue to collaborate on these issues, particularly ahead of the COP26 UN Climate Change Conference in November. The following are the other key highlights of the discussions:
- Participants provided updates on their respective insurance landscapes and welcomed the progress made at roundtable discussions between UK and Brazilian governments, regulators, and industry associations in the preceding months. The Brazilian Economy Ministry reiterated its ambitions to establish Brazil as a regional reinsurance hub in Latin America and UK participants outlined the key benefits and reforms that would support Brazil to achieve this ambition.
- Participants discussed a wide range of matters relating to the asset management sector and the credit market. HM Treasury discussed its work on the UK’s funds regime review and the Brazilian Economy Ministry highlighted new developments in Brazil regarding Collateral Managing Institutions (IGGs). IGGs are a new type of business that provide collateral evaluation and management services with the aim of increasing efficiency and competition in collateral-lending credit markets by breaking the verticalization and lowering collateral management costs, thus enabling smaller banks and fintech firms to operate in the market alongside larger incumbents.
- The Bank of England outlined the international regulatory work on addressing Non-Bank Financial Institution vulnerabilities and the work of the International Monetary Fund and Financial Stability Board work on emerging market economy USD funding.
- Participants also took stock of capital markets collaboration. The Brazilian Economy Ministry highlighted updates on capital markets in Brazil, such as the new legal framework for start-ups and the regulatory Sandbox. HM Treasury outlined progress on regulatory reforms, including through the Wholesale Markets Review and the Lord Hill Listings Review. Both sides agreed on the scope for increased cross-border activity in this area.
Keywords: Europe, Americas, UK, Brazil, Banking, Insurance, Securities, Sustainable Finance, Climate Change Risk, ESG, Credit Risk, Collateral Management, HM Treasury
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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