BCBS launches consultation on climate-related financial risk management

The Basel Committee on Banking Supervision (BCBS) has issued a public consultation on the principles for the management and supervision of climate-related financial risks.

According to Regulation Asia, the BCBS is seeking to promote a ‘principles-based approach’ to improving banks’ risk management and supervisors’ practices related to climate-related financial risks through the consultation.

The BCBS noted that the principles being proposed 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.

Regulation Asia noted that the consultative document builds on a review of the current Basel Framework and draws from existing supervisory initiatives undertaken by individual prudential authorities and other international bodies.

The document includes eighteen high-level principles, with 12 of them to provide banks with guidance on effective management of climate-related financial risks. These principles involve recommendations on board responsibility, internal control frameworks, corporate governance, risk management frameworks, credit risk management, market risk management, scenario analysis and corporate governance.

The consultation will remain open for comment until 16 February 2022.

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