Climate-Related Financial Risks

Basel Committee Consults on Principles for the Effective Management and Supervision of Climate-Related Financial Risks

The Basel Committee on Banking Supervision issued a public consultation on principles for the effective management and supervision of climate-related financial risks. This follows the publication of a series of analytical reports earlier this year:

These reports contributed to the Committee’s sequential approach to working on climate-related financial risks and follow the Committee’s 2020 stocktake on members’ existing initiatives. Both reports leveraged extensive reviews of existing literature, including publications by scientists, academics, central banks, supervisory authorities,  discussions with large banks, and the work of other international forums such as the Network for Greening the Financial System and the Financial Stability Board.

Taken together, the reports concluded that climate risk drivers can be captured in traditional financial risk categories. But additional work was needed to connect climate risk drivers to banks’ exposures and to reliably estimate such risks.

This week, the Committee is taking a holistic approach to addressing climate-related financial risks to the global banking system. This includes the assessment and consideration of disclosure, supervisory and regulatory measures.

Through this public consultation, the Committee seeks to promote a principles-based approach to improving both banks’ risk management and supervisors’ practices related to climate-related financial risks. The principles 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.

The Committee intends to monitor implementation across member jurisdictions to promote a common understanding of expectations, support the development of harmonised practices and facilitate implementation of the principles as soon as possible.

The Committee welcomes comments on the principles, which should be submitted here by 16 February 2022.

All submissions will be published on the BIS website unless a respondent specifically requests confidential treatment.

Source: BIS

Post Author: Wealth Monaco