Well, now we are talking. ECB published a paper about a capital buffer linked with the climate risk. This may be the first steps on imposing a capital charge on banks which are not serious enough on climate. Based on the results of the paper, most of the banks would receive a SyRB (Systemic Risk Buffer) of 50bps, while the maximum a bank would receive is 200bps. Cummulated, the SyRB would equal 51 billion EUR. The study covered 107 Significant Institutions from Euro Zone, and is only looking to the transition risk. So, this is only a minimum amount. The "real" amount will be larger. The buffer is depending on the transition risk losses as percentage of RWA. #EY #ClimateRisk #Banking
Razvan Pirnac, FCCA’s Post
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#banks #capital #buffers #resilience #Basel #CRR #CRD #BRRD #systemic #climaterisk #scenarios #ECB #macroprudential I want to believe smart risk managers already include these scenarios in their own capital planning and allocation steering, and that banks already include them in finance contracts too. Projecting climate scenarios further on their own loan portfolio, building on the ECB's climate risk stress test they just had to do anyway. Why wouldn't they? European Banking Federation https://lnkd.in/eZaFWz4q
Designing a macroprudential capital buffer for climate-related risks
ecb.europa.eu
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Climate Risks - Public Consultation - Basel Committee on Banking Supervision The BCBS is running another public consultation proposing scope and framework for financial institutions to adopt climate scenario analysis, which would contribute to strengthen enforcement by regulators and harmonize the methodology considering the context of different countries. This initiative adds to other governance and transparence instruments on impacts of climate change on the resilience of the banks business model, as well as exposure to physical and transition risks. The leadership of BCBS on such matter is of high relevance, as BCBS is the main global forum to set prudential standards for banks and its steps are closely followed by the market and governments. Usually, its discussions cascade to rules and best practices. I would say that our floods in the South of Brazil leave absolute no room for the financial system not to keep moving and improving risk climate analysis. Default is in place. Physical climate risks do represent a huge systemic risk to our economy. Stakeholders may send comments up to July 15th: https://lnkd.in/dTKfwDqj Rui Cabral, Lucas Baruzzi, Fernando Silas Siedschlag and I wrote a brief article on the consultation, have a look at it (in Portuguese): https://lnkd.in/dt6CME-A
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What happens if banks fail to comply with EU Pillar 3 reporting requirements? In a recent interview, Clarity AI’s regulatory lead, Tom Willman explains the risks banks face when they fall short of compliance: 1️⃣ Financial Penalties: In the last year, we have seen that the European Central Bank (ECB) is ready to issue fines in cases where it sees that banks are not taking ESG risks sufficiently into account. 2️⃣ Reputational Damage: Non-compliance can lead to negative press coverage and loss of trust from clients and partners. 3️⃣ Missed Strategic Opportunities: More than just a disclosure exercise, Pillar 3 reporting helps banks build robust climate risk strategies—critical for long-term resilience and competitiveness. 👉 Watch the full video to learn why Pillar 3 compliance is not just about avoiding penalties—it’s a foundation for stronger ESG risk management. #sustiainablefinancec | #sustainableinvesting | #responsibleinvesting | #EUPillar3 | #banking | #climate | #climaterisk | #ESG
What happens if banks fail to comply with EU Pillar 3 reporting requirements?
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The ECB has grown increasingly active in its efforts to get lenders to treat ESG risks — particularly climate change — as financially material. The Frankfurt-based central bank has conducted climate stress tests and even threatened some lenders with fines for failing to take ESG risks seriously. A 2023 study by the ECB found that almost three-quarters of European banks’ corporate loan books are exposed to nature-related risks. And ECB Executive Board Member Frank Eldersonsaid earlier this year that he and his colleagues “will continue insisting that banks actively manage the risks” associated with dealing with climate change. #eu #esg #esgreport #riskmanagement #operationstrategy #businessstrategy
Bankers in Europe Push Back as ECB Conducts New ESG Risk Review
bloomberg.com
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Published jointly by #OliverWyman and #afme (Association for Financial Markets in #Europe), this important guidance report entitled: 𝗔 𝗰𝗼𝗺𝗺𝗼𝗻 𝗽𝗮𝘁𝗵 𝘁𝗼 𝗶𝗺𝗽𝗿𝗼𝘃𝗲 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗥𝗶𝘀𝗸 𝗦𝘁𝗿𝗲𝘀𝘀 𝗧𝗲𝘀𝘁𝗶𝗻𝗴 𝗮𝗻𝗱 𝗦𝗰𝗲𝗻𝗮𝗿𝗶𝗼𝘀 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 aims to propose an appropriate scope for internal and external regulatory exercises, the sufficiency of existing analytical tools and data sources, and analytical capabilities banks should develop. It also tackles the question of how climate risk stress testing results should be used by banks and regulators and embedded into bank operations. The other issues analysed in the report include various aspects of the climate risk stress test, including modelled risk types, portfolios in scope, modelling granularity, time horizons, and balance sheet approach. As noted in the report: “𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 𝘀𝘁𝗿𝗲𝘀𝘀 𝘁𝗲𝘀𝘁𝗶𝗻𝗴 𝗶𝘀 𝗽𝗿𝗼𝘃𝗶𝗻𝗴 𝘁𝗼 𝗯𝗲 𝗮 𝗰𝗿𝘂𝗰𝗶𝗮𝗹 𝗳𝗿𝗼𝗻𝘁𝗶𝗲𝗿 𝗶𝗻 𝘁𝗵𝗲 𝗯𝗮𝗻𝗸𝗶𝗻𝗴 𝘀𝘆𝘀𝘁𝗲𝗺". #GRC #ESG #climaterisk #riskmodeling #riskmanagement #stresstesting #riskmeasurement #modelriskmanagement #MRM #governance #scenarioanalysis #regulatoryguidance #financialrisks #transitionrisk #balancesheetapproach #capitaladequacy #bankingsector #financialmarkets
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Following UNEP FI head Eric Usher (Usher, E.) & WWF International DG Kirsten Schuijt's Global Roundtable discussion unveiling our new joint publication “Navigating Nature-related Regulations for Banks”, we are hosting a webinar on January 16 to discuss the report’s findings on the latest nature-related policy trends across 50 jurisdictions in APAC, Americas, Africa, and EU. Register: https://lnkd.in/e6CW9jAm A sneak peak of the findings: at least 29 jurisdictions—totaling more than EUR 75 trillion of banking assets—are starting to reflect nature-related topics in prudential regulation. Join us for the webinar for topics including: - Regional trends across supervision, taxonomies and corporate disclosures - Key priorities of central banks and supervisors going forward - Case studies presented by leaders from the Network for Greening the Financial System (NGFS), European Central Bank (ECB), and Bank Negara Malaysia (BNM) Central bank speakers include: Marc Reinke, Co-chair of Taskforce on Nature, NGFS / Head of Sustainable Finance Office, De Nederlandsche Bank Guan Schellekens, Team Lead of the Climate Risk Project Management Office, ECB Katie Lee Sheah Tsan, Climate Policy Strategist, BNM #GRT2024 #NaturePolicy -- Laura Canas da Costa, Romie Goedicke den Hertog, Elodie Feller, Jessica Smith, Emily R. Dahl, Sem Houben, Maud ABDELLI, Siti Kholifatul Rizkiah, Pina Saphira, Christine J. Wanjiku Mwangi, CFA, Aaron Vermeulen, Elisa VACHERAND, Nicolas P., Elizabeth Aceituno
Jan. 16 Webinar: Navigating Nature-related Regulations for Banks
brighttalk.com
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An important straightforward presentation by Ms. Caterina Lepore addressing the 𝗔𝗽𝗽𝗿𝗼𝗮𝗰𝗵𝗲𝘀 𝘁𝗼 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗥𝗶𝘀𝗸 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀. Climate risk analysis provides an opportunity to 𝗯𝘂𝗶𝗹𝗱 𝗿𝗲𝘀𝗶𝗹𝗶𝗲𝗻𝗰𝗲 𝘁𝗼 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗰𝗵𝗮𝗻𝗴𝗲 through understanding and treating its physical and transition risks. Regulators around the world. Since June 2022, the #Basel Committee on Banking Supervision (#BCBS) has published principles for the effective management and supervision of climate-related financial risks. The document forms part of the Committee's holistic approach to addressing climate-related financial risks to the global banking system and seeks to improve banks' risk management and supervisors' practices in this area. Central Banks around the world and supervisory authorities have followed suit notably the European Central Bank (#ECB), the US Federal Reserve Board (#FRB), the Bank of England (#BOE), the Reserve Bank of India (#RBI) and others. The purpose of the presentation is to: -Introduce financial stability policy makers and national prudential supervisors to climate risk analysis (namely the key technical terms and concepts used in climate risk analysis: emissions and temperature scenarios, physical and transitions risk definitions) -Lay out approaches to climate risk analysis, based on the #IMF framework to climate risk analysis in #FSAPs. #riskmanagement #climateriskmanagement #transitionrisk #physicalrisk #riskassessment #riskmeasurement #riskmitigation #stresstesting #climatechange #ESG #supervisoryguidance #riskmetrics #information #resources #COP29 #sustainability #biodiversity #knowledge #emissions #pollution #financialrisk #environment #extremeweather #lowcarbon #hazards #carbontax #correlation
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Banks are increasingly recognizing the importance of integrating climate risk into their investment processes. Yet, the lack of reliable data hinders effective risk assessment of both physical and transition risks. Despite underestimation, addressing these risks is crucial to avoid loan losses. In this commentary, produced in collaboration with IFI Global, we explore why it is more important than ever to incorporate climate risk and where banks can start in their measurement. Read more on our website: https://hubs.ly/Q02GxwKr0 #banking #climaterisk #investment #climatedata #transitionrisk
Climate risk in banking: A growing threat and untapped opportunity
https://www.fathom.global
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The financial sector is often the first to push forward some of the most progressive ideas out there ... even when it comes to fines. Up to 5% of daily revenue for a bank, can be quite a substantial amount 💰 💰 💰 In November 2020, the ECB published a catalogue of recommendations for banks to identify and manage climate and environmental risks as part of their governance, strategy and overall risk management mainly lodged with their borrowing clients. For example, one recommendation asks banks to quantify the amount or percentage of carbon-related assets in each portfolio. #climatechange #banks #ECB #ESG #sustainability #finance
ECB threatens fines on banks failing to integrate climate risk
euronews.com
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The RBI is rightly concerned about the impact of climate risks on financial stability. The Regulator wants its regulated entities to identify, assess, manage, and disclose climate risks. Hopefully this will boost domestic sustainable financing as direct outcome of climate risk management. Read my article for more on the RBI draft disclosure framework on climate risks for banks and NBFCs. #climate risk #climate-related financial risk #TCFD #transition risk #physical risk #financed emissions #financial stability https://lnkd.in/dKZ9XSzV.
RBI Steps In To Check On Climate Risks In Banks And NBFCs
ndtvprofit.com
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7moThanks for sharing