Viridian Analytics’ Post

The Basel Committee on Banking Supervision has issued a discussion paper on how climate scenario analysis (CSA) can be practically used to help strengthen the management and supervision of climate-related financial risks. The newly published discussion paper, "The role of climate scenario analysis in strengthening the management and supervision of climate-related financial risks", looks at the objectives of CSA exercises and relevant features to design and use them. In 2022, the "Principles for the effective management and supervision of climate-related financial risks" encouraged banks to use CSA to assess the resilience of their business models and strategies to a range of climate-related pathways and determine the impact on their overall risk profile. Supervisors were also encouraged to determine whether banks were applying CSA, where appropriate. However, differences in the scope, features and approaches of CSA exercises across jurisdictions and banks limit the harmonisation of supervisory expectations and the comparability of results. The Committee is therefore seeking stakeholder feedback that, in conjunction with the work under way in other global forums such as the Financial Stability Board (FSB) and Network for Greening the Financial System (NGFS), may lead to additional complementary work in pursuit of its mandate to strengthen the regulation, supervision and practices of banks worldwide. Read more here https://lnkd.in/ebDf5XCJ #BaselCommittee #ClimateRisk

The Basel Committee published a discussion paper on the uses and design features of Climate Scenario Analysis (CSA) exercises. The discussion paper presents the outcome of analytical work conducted by the Task force on climate-related financial risks (TFCR). The discussion paper highlights that CSA may be used for multiple purposes and, while there are key features in all CSA, there are also usage-specific considerations that need to be taken into account. It was great working on this with Kevin Stiroh Theresa Löber Azusa Takeyama Ricardo José Nunes Pereira Moraes Olga Streltchenko Mario Morelli Caterina Ciancaglioni Rie Asakura jean-philippe Svoronos David Ignell, CFA among others. We hope this publication encourages banks to continue to invest in building their capabilities and advances the emergence of common practices for the practical application of CSA within risk management and supervision and further enhance the ability of banks and supervisors assess climate-related financial risks.

https://lnkd.in/dAP73Bfp Not such good practices as presumed : <<“The United States’ lack of progress and innovation in establishing robust measures to address the financial and economic risks from climate change places us behind our international peers and is counterproductive to American interests,” the Democratic and independent lawmakers said in a letter written to the chairs of the Federal Reserve, Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). The Fed’s recent climate stress test showed that the six largest US banks face significant challenges in predicting the impact of climate change on their loan portfolios, which casts “serious doubt on the preparedness of our banks and financial systems for climate-related financial risks”.>> #FED #stress #preparedness #resilience #climate #loans #portofolio #ESG #financial #eco #green #USA #banking

Climate risk affects all industries - but how are banking organisations managing its impact? Last year, the Federal Reserve Board conducted a pilot exercise with six large U.S. banks to better understand their management practices and challenges, and ultimately enhance their ability to manage climate-related financial risk. The findings of this pilot exercise could provide a starting point for banks and other financial institutions in managing climate risk in future, from determining the role of insurance to tackling key data challenges. If you'd like to learn more about the FRB's findings, read on below. #insurance #climaterisk

Thought provoking article highlighting the reasons for the challenges facing the global financial system today. Lots of issues to digest here. Of particular note is the rise in NBFI share of financial assets and the potential risk this involves, the general indebtedness of western states and the use of debt to finance consumption in the west. Plus of course the productivity issue and the true risk of bonds! Interested to hear others' thoughts.  #economics #investment #capitalmarkets https://lnkd.in/eWY-vm4X

An in-depth analysis of the global financial system and what types of securities could be considered a genuinely risk-free. “To be regarded as genuinely risk-free, a sovereign bond should, at a minimum, offer negligible default risk and the backing of a fiscally conservative government. Historically, such credentials have been lacking and inflation has made a nonsense of safety. Investors in gilts during the inflationary period from 1972 to 1974, for example, lost half their real wealth.” #debt #bonds #dcm #inflation #rates #financialsystem

As the risks of #climatechange is percolating thru the insurance and reinsurance industries, it may be beginning time penetrate the institutional thick skulls of the banking trade.

#Scenario_analysis and stress testing are key to navigating climate-related financial risks. KPMG's expertise can help #banks test their strategic responses effectively. Let's prepare for a future where climate change is a strategic imperative. Deep dive in the 10 upcoming trends in the #banking sector in this KPMG Insight. #KPMGElevate #KPMGValueCreation #KPMGDeals #ScenarioAnalysis #ClimateRisk #Banking

On 17 April 2024, the Bank of England published an article discussing the use of scenario analysis to measure climate-related financial risks 🔎 In Mazars in the UK's latest insight, Pierre-Alexandre GERMONT and I look at: 🔵 The Bank of England’s approach to scenario analysis 🔵 Conducting asset-specific scenario analysis 🔵 What does this mean for UK financial institutions Read more ➡ http://maza.rs/6044YKD0s #Banking #ClimateRisk #FinancialRisk #ScenarioAnalysis

The financial industry is exposed to nature-related risks through the investment, insurance, and banking services provided to companies that depend on and impact nature. The European Central Bank found that around 75% of bank loans to companies operating in the Euro space were made to companies that had at least one major nature-related dependency.    In our most recent article, Gloria Perez Torres, LLM, Prof.PgDip (FCC) provides insight into how the Taskforce for Nature-related Financial Disclosure (TNFD) may affect the Financial Services industry. Please see here for more detail: https://lnkd.in/evnP5nYc