BCBS Urges Climate Rules for Banks
The committee of banking supervisory authorities established by the G10 urges banks to take climate change into perspective when making business decisions.
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Extinction Rebellion activists protest on the Bank junction outside the Bank of America (Credit: Getty Images)
The top international banking supervisory authority, the Basel Committee on Banking Supervision (BCBS), said on Tuesday that lenders should take climate risks into consideration when making business, offering a suggestion list of 18 "principles" guiding banks and national supervisors.
Banks should "consider the potential impacts of climate-related risk drivers on their individual business models and assess the financial materiality of these risks," the BCBS said in a consultation document.
The Group of Ten body (G10) is charged with creating rules for the banking system to ensure its stability.
The BCBS offered banks and supervisors up for public comment before making binding proposals after developing its list of principles, with 12 of them aimed at banks themselves and six at supervisors.
The body started its list by calling for lenders to "develop and implement a sound process for understanding and assessing the potential impact of climate-related risk drivers on their businesses and on the environments in which they operate."
The Bank for International Settlements (BIS) also said climate-related responsibilities should be clearly assigned to individual board members or committees and "throughout the organizational structure" of financial firms, urging lenders to collect data on businesses to enlighten their decisions.
"Banks should assess whether climate-related financial risks could cause net cash outflows or depletion of liquidity buffers, assuming both business-as-usual and stressed conditions," the BCBS concluded, giving respondents until February 16, 2022, to give feedback to the committee.
