The top international banking supervisory authority on Tuesday said lenders should account for climate risks when managing their business, suggesting a list of 18 “principles” to guide 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 Basel Committee on Banking Supervision said in a consultation document.
The BCBS is charged with creating rules for the banking system to ensure its stability.
After working up its list of principles — 12 aimed at banks themselves and six at supervisors — the BCBS has offered them up for public comment before making binding proposals.
Top of its list is 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”.
Climate-related responsibilities should be clearly assigned to individual board members or committees and “throughout the organisational structure” of financial firms, the BIS adds, as well as urging them to collect data to inform their decisions.
The committee’s climate principles would cover internal audit and the capital lenders must set aside to cushion financial shocks.
“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 said.
Respondents have until February 16 next year to give feedback to the committee.