Climate Change: Issues for Banking Supervisors

Resource Description: This report explores the possible supervisory and regulatory responses in the banking sector to climate change-related risks.

Key Insights:

1. Outlines both the physical risks and transitional risks to banks from climate change, such as higher operating costs and lower productivity of assets, as well as operational risks
2. Explains current and current supervisory and regulatory responses to climate change such as stress tests, disclosure and removing obstacles to green financing
3. Provides an Annex on supervisory expectations of banks’ climate change and risk management

Why This Matters: In many emerging markets, the banking sector is the main channel of financial intermediation. Climate change poses risks to banks’ credit, market, and operational exposures, and may threaten stability. Supervisors should ensure banks understand and address these risks, while also considering how to guide banks in limiting climate change.