On 14 March, WSBI-ESBG submitted its response to the Basel Committee on Banking Supervision (BCBS) consultation on its Pillar 3 disclosure framework for climate-related financial risks.
For context, on 29 November 2023, the BCBS released a public consultation paper on implementing a Pillar 3 disclosure framework to address climate-related financial risks, as part of its broader efforts to enhance global banking system stability. The framework comprises qualitative elements such as governance frameworks and risk management practices, alongside quantitative requirements covering sector exposures, financed emissions, and geographical risk assessments. Bank-specific metrics, including credit quality and maturity profiles, are incorporated, with illustrative templates provided. The proposed implementation date for this framework is 1 January, 2026.In its response, WSBI-ESBG underscored the multifaceted considerations surrounding the implementation of a Pillar 3 disclosure framework for climate-related financial risks. While emphasizing the framework’s potential benefits in promoting comparability, market discipline, and enhanced risk management, it also stressed the risks associated with non-implementation, including delayed adoption and unattended risks.
WSBI-ESBG also emphasized the importance of interoperability with other standard-setting bodies’ requirements, along with the need for flexibility to adapt to varying national contexts. Moreover, addressing data challenges and ensuring meaningful qualitative and quantitative disclosure remain a top priority for us, as does the necessity for transitional arrangements and careful consideration of the effective date.
Furthermore, exploring liquidity risk disclosures and developing bank-specific metrics require nuanced approaches to ensure their meaningfulness and prudential value. Forecast information, concentration risk disclosures, and assessments of transition and physical risk exposures present additional complexities, necessitating collaborative efforts to overcome data challenges and ensure comparability. Lastly, the design of templates should facilitate clear communication of climate-related financial risks while addressing potential challenges in data interpretation and usability.
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