Climate-related prudential risks in the banking sector: A review of the emerging regulatory and supervisory practices

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Abstract

This article reviews emerging regulatory and supervisory practices with respect to prudential risks from climate change in the banking sector. It evaluates the theoretical considerations with respect to climate-related financial risks in the banking sector, reviews the related academic literature, and analyzes the policy-related publications from various regulatory authorities. As a result of this assessment, the article concludes that the major regulatory and supervisory expectations can be categorized into four key areas: (i) board-level attention to climate risks and integrating them into internal governance frameworks, (ii) embedding climate risks into strategies and overall risk management frameworks, (iii) identifying climate-related material exposures and disclosure of relevant key metrics, and (iv) assessing capital impact from climate risk through scenario analysis and stress testing. The article also presents a number of implications for banks and banking regulators in other jurisdictions to help them identify the actions required to address climate change risks in the banking sector.

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APA

Feridun, M., & Güngör, H. (2020, July 1). Climate-related prudential risks in the banking sector: A review of the emerging regulatory and supervisory practices. Sustainability (Switzerland). MDPI. https://doi.org/10.3390/su12135325

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