Mona Bedair’s Post

🇪🇺 The European Banking Federation (EBF) supports the Basel Committee's integration of climate-related financial risks into the Basel III framework, focusing on Pillar 3 disclosures. This endorsement underscores the banking industry's commitment to transparency and resilience, addressing climate change's financial impacts. Read more in our article: https://lnkd.in/dqPNAi9P #ClimateChange #FinancialStability #EBF #BaselIII #SustainableBanking

The Basel Committee on Banking Supervision's 2022 Principles promote the use of climate scenario analysis (CSA) to assess banks' resilience to climate-related risks. To enhance CSA practices, the Committee released a discussion paper on the role of climate scenario analysis in strengthening the management and supervision of climate-related financial risks. In 2023, the Committee started monitoring the implementation of these Principles, underscoring CSA's importance. However, varied methodologies and data limitations across jurisdictions remain a challenge. Read this research paper to know more about it! #Banking #RiskManagement #RiskMitigation #FinancialInstitutions

🌍 Ensuring Banks' Resilience to Climate and Environmental Risks: Overcoming Challenges Together 🌿 The speech by Frank Elderson highlights an inspiring call to action for all of us to come together and ensure the resilience of banks against climate and environmental risks. By recognizing the urgency of this issue and taking concrete steps to build internal capacity and implement good practices, we can pave the way for a more sustainable future. The message underscores the importance of collaboration and ongoing dialogue between regulators and the industry, emphasizing that we all have a collective responsibility to face the challenges ahead. Let us take up this challenge with unwavering commitment and work together to overcome the remaining hurdles, for the benefit of our planet and future generations. 🔍 Understanding the Urgency: the tangible impacts of climate change and nature degradation, citing 2023 as the hottest year on record and the rising frequency of extreme weather events. These risks aren't isolated but intricately interwoven into traditional risk categories, posing challenges across credit, liquidity, market, reputational, and operational fronts. 🔧 Building Internal Capacity: Recognizing the need for expertise, Elderson emphasizes the importance of internal capacity-building within banks. Empowering employees at all levels, fostering a comprehensive understanding of C&E risks 📊 Current State of Risk Management: While progress has been notable, full alignment with supervisory expectations is yet to be achieved. However, positive strides have been made, with some banks effectively integrating C&E risks into strategy, governance, and risk management frameworks. 🌟 Implementation Challenges and Good Practices: Notably, several banks have already adopted innovative risk management practices focusing on nature-related risks, demonstrating the feasibility of addressing these challenges. 🚀 The Path Ahead: 2024 marks a pivotal year for banks to fortify their resilience against C&E risks. It is important to meet supervisory expectations and embrace Paris-compatible transition plans to navigate the evolving regulatory landscape effectively. 👥 Collaboration is Key: By sharing good practices and staying abreast of regulatory developments, banks can navigate the complex landscape of C&E risks more effectively. In conclusion, We are all collectively responsible for ensuring banks' resilience in the face of climate and nature risks. With unwavering commitment and collaborative efforts, we can overcome the remaining stumbling blocks and pave the way for a more sustainable future. #ClimateResilience #Banking #Sustainability

A seed grows with no sound. For 5 years, European banks have been engaged and challenged by their supervisor to step up on climate change. You may not have noticed if you’re not in the thick of these developments but things are changing faster that you might imagine. European Central Bank executive board member and ECB Banking Supervision Supervisory Board vice-Chair (and Network for Greening the Financial System (NGFS) founding Chair emeritus) Frank Elderson gave his assessment of progress in climate and environmental (C&E) risk management by European banks in a speech last Thursday (abridged version below abridged version below, the original is worth reading for the examples). Frank Elderson is certainly not known for being complacent so his rather positive assessment has some weight. —————— We have come a long way since we first started discussing C&E risk management. It is thanks to the hard everyday work of thousands of dedicated experts in banks all over Europe that vital progress achieved. The risks stemming from the climate and nature crises are increasingly being integrated into banks’ risk management, strategies and governance. Relevant expertise and human capital is crucial. Banks’ management bodies need to be well-versed in C&E risks, and we expect banks to reflect these skills in board composition. And we see banks walking the talk, for instance by setting up a dedicated committee composed mainly of independent directors with the appropriate skills. But this is not only a task for CEOs and committee members. Employees across the organisation should be aware of how the climate and nature crisis might affect their everyday tasks. And it is also critical for banks to have the necessary resources to implement well-designed frameworks across the institution. The ECB has consistently reminded that this is not a call on banks to divest from carbon-intensive industries. It is a call to actively manage the risks, for instance, through client engagement and transition finance. In other words, banks must be cognizant of the risks they take and manage them accordingly. We see more and more banks doing so. Although at present none of the banks under our supervision fully meets all our expectations, each and every of our expectations has already been fulfilled by at least one bank. These examples show that, while the task is challenging, good practices are already out there. By the end 2024, we expect all banks to be aligned with our expectations. We will closely monitor progress and, if necessary, we will use all the measures in our toolkit these include imposing periodic penalty payments and setting Pillar 2 capital requirements as part of the annual Supervisory Review and Evaluation Process. Since 2019, some major stumbling blocks have been overcome thanks to thousands of motivated experts – bankers and supervisors alike. But the job is not yet done: 2024 is a crucial year to clear our path of the remaining stumbling blocks.

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.

Banks must identify, measure and manage climate-related and environmental risks, says Supervisory Board Vice-Chair Frank Elderson. They are already making progress on this front and the amount of exemplary good practice is increasing. Banks can leverage these examples to ensure they meet supervisory expectations by our end-2024 deadline. We will use all measures in our toolkit to ensure sound management of climate-related and environmental risks in the banking and financial sector. Read the speech https://lnkd.in/eheStkQx

Take a look at the most recent speech of SSM Vice-Chair Frank Elderson on climate and nature risks: -To be climate and nature risk resilient, banks must identify, measure and - most importantly - manage climate-related and environmental (C&E) risks -Failing to adequately manage C&E risks is no longer compatible with sound risk management, just as it would not be acceptable to turn a blind eye to other relevant drivers of standard risk categories. -The ECB has consistently reminded that this is not a call on banks to divest from carbon-intensive industries. It is, instead, a call to actively manage the risks, for instance, through client engagement and transition and resilience finance. -Although at present none of the banks under our supervision fully meets all our expectations, each and every of our expectations has already been fulfilled by at least one bank. This shows that progress is possible, and that it is not just taking place among a few banks, but across the board. This is good news, since we expect all banks under our supervision to be fully aligned with our supervisory expectations by the end of 2024. -The set of exemplary good practice is increasing. Banks can leverage these examples to ensure they meet supervisory expectations by our end-2024 deadline. ECB Banking Supervision will use all measures in our toolkit to ensure sound management of C&E risks. -The ongoing climate and nature crises will inevitably render our economy more susceptible to shocks. From a risk-based perspective, ECB Banking Supervision will continue to play our part in spurring on banks to prepare for these risks, in a 1.5 degree, a 2 degree and even a 2.9 degree scenario.

Great speech that summarizes the current progress of banks and ECB’s view. Also another reminder that proper management of climate and environmental risk needs to be in place by end of 2024!

An excellent overview of ECB position on CER risks and the coming challenges for SSM banks. And a worthwhile quote, illustrating that de-risking massively by divesting from carbon intensive activities is not the expected path: « The ECB has consistently reminded that this is not a call on banks to divest from carbon-intensive industries. It is, instead, a call to actively manage the risks, for instance, through client engagement and transition and resilience finance. In other words, banks must be cognizant of the risks they take and manage them accordingly ». Let’s expect that the incentives to be a sheer transition enabler, instead of being a massive de-risker, will be fully recognized in the future (through regulation or market practices).

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