Climate-related financial risk in banking - the state of play on capital requirements

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Climate-related financial risk in banking - the state of play on capital requirements

As the regulatory policy framework for climate risk develops, a key consideration for banks is how climate-related financial risks are captured by prudential capital requirements. COP26 (Conference of the Parties), which takes place in November, has more broadly also heightened banks’ focus on developing their climate action plans.
In this alert you will read more about how supervisors will use the Pillar 2 framework to ensure that banks hold sufficient capital against climate risk and possible use of climate risk-specific RWA scalars (green supporting/brown penalising factors) in the prudential framework.