On 14 October 2020, the Bank for International Settlements published a speech by Kevin Stiroh (Co-Chair of the Task Force on Climate-related Financial Risks of the Basel Committee on Banking Supervision and Executive Vice President of the Federal Reserve Bank of New York) on the Basel Committee’s initiatives on climate-related financial risks.
In his speech Mr Stiroh shares some of the key findings from the Basel Committee’s stocktake of members’ existing regulatory and supervisory initiatives on climate-related financial risks. For example the stocktake found that a majority of authorities have taken measures to raise awareness of climate-related financial risks among banks. Approximately two fifths of members have issued, or are in the process of issuing, more principles-based guidance regarding climate-related financial risks. However, the majority of Basel Committee members have not factored, or have not yet considered factoring, the mitigation of such risks into the prudential capital framework.
In terms of the Basel Committee’s current focus on climate risk, Mr Stiroh states that it is currently looking at climate risk transmission channels as well as methodologies for measuring and assessing these risks. The Basel Committee intends to complete its fundamental research initiatives in this area by mid-2021. Building on this analytical work, the Basel Committee will consider the extent to which climate-related financial risks are incorporated in the existing Basel Framework, and identify effective supervisory practices to mitigate such risks. The Basel Committee does not currently have a view on potential prudential treatments or supervisory expectations related to the mitigation of climate-related financial risks.