Basel Committee publishes stocktake report on climate-related financial risk initiatives

Press release  | 
30 April 2020
  • First report by high-level Task Force on Climate-related Financial Risks.
  • Most BCBS members are undertaking regulatory and supervisory initiatives on climate-related financial risks.
  • Future work includes analytical reports and developing effective supervisory practices.

    The Basel Committee on Banking Supervision is today publishing a stocktake report on its members' existing regulatory and supervisory initiatives on climate-related financial risks. The report was prepared by the Committee's high-level Task Force on Climate-related Financial Risks (TFCR). The TFCR is co-chaired by Frank Elderson (Executive Director of Supervision at the Netherlands Bank) and Kevin Stiroh (Executive Vice President of the Federal Reserve Bank of New York and head of the Supervision Group).

    Climate-related financial risks refer to the set of potential risks that may result from climate change and that could potentially impact the safety and soundness of individual financial institutions and have broader financial stability implications for the banking system. These risks are typically classified as physical and transition risks. Physical impacts include the potential economic costs and financial losses resulting from the increasing severity and frequency of extreme climate change-related events. Transition impacts relate to the process of adjusting to a low-carbon economy.

    The stocktake was conducted ahead of the coronavirus disease (Covid-19) pandemic. Covid-19 has further highlighted the importance of mitigating the risks of events with severe global impacts.  

    The stocktake report suggests that the majority of Committee members are undertaking a number of regulatory and supervisory initiatives on climate-related financial risks. While the specific types of initiatives and level of advancement in this field varies across member institutions, most Committee members are undertaking work on the measurement of climate-related financial risks, raising awareness of such risks with banks and external stakeholders, requiring or encouraging banks to disclose information on to climate-related financial risks, stress-testing of such risks and/or promoting the growth of sustainable finance.

    The TFCR is charged with contributing to the Committee's mandate of enhancing global financial stability by undertaking the following lead-off initiatives on climate-related financial risks:

  • a set of analytical reports on climate-related financial risks, including reports on the transmission channels of such risks to the banking system as well as on measurement methodologies; and
  • the development of effective supervisory practices in order to mitigate climate-related financial risks.
    • The Committee will coordinate its work with similar initiatives underway in other international forums and standard setting bodies. The Committee is also an Observer of the Network for Greening the Financial System.

      Note to editors:

      The Basel Committee is the primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. The Committee reports to the Group of Central Bank Governors and Heads of Supervision and seeks its endorsement for major decisions. The Committee does not possess any formal supranational authority, and its decisions do not have legal force. Rather, the Committee relies on its members' commitments to achieve its mandate. The Basel Committee is chaired by Pablo Hernández de Cos, Governor of the Bank of Spain.

      More information about the Basel Committee is available here.