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Regulatory Briefing: Basel Committee under pressure ahead of climate risk principles release

By Victor Smart

Green finance groups demanding climate-related capital requirements continue to put pressure on the Basel Committee on Banking Supervision as they wait for the publication of its principles for managing and supervising climate-related financial risks. Following a consultation that closed in February, the committee – which is the primary global standard setter for the prudential regulation of banks – has agreed the measures but will not announce them until later this month. Green financial groups have opposed the committee’s proposed approach, which refuses to consider Pillar 1 capital adequacy provisions on climate though it is willing to consider them on cryptocurrencies

The BCBS says: “The principles seek to promote a principles-based approach to improving risk management and supervisory practices to mitigate climate-related financial risks. They are designed such that they can be adapted to a diverse range of banking systems in a proportional manner. The publication of these principles forms part of the committee’s broader assessment of potential measures – spanning disclosure, supervisory and regulatory measures – to address climate-related financial risks to the global banking system.” The BCBS says it will also provide an update on its work across these dimensions and will continue to collaborate with other global forums on climate-related financial risk initiatives.

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