Banking Risk & Regulation Podcast - How might ESG impact prudential regulatory frameworks?

How might ESG impact prudential regulatory frameworks?

12/15/20 • 27 min

Prudential frameworks are designed to ensure banks can cope with risks and still remain solvent in the face of economic adversity. Environmental, Social and Governance (ESG) factors have risen up the political and regulatory agenda due to issues such as increasingly extreme weather patterns through to growing concerns over social justice.

Society increasingly expects banks, as capital allocators, to do their bit in helping to fight climate change and to not support certain unethical businesses. This could eventually result in changes to the Basel framework through to the EU's capital requirements regulation and directive (CRR/CRD).

This podcast asks whether regulators should use green supporting and brown penalising factors to influence bank lending policies, how stress tests can ensure banks can cope with ESG related scenarios through to how to cope with the fact that there is not enough ESG data to populate bank risk models.

Exploring this topic is Ingalill Asphold, Head of Banking Prudential Regulation, Markets at Finance FInland and Jeroen Van Doorsselaere, Head of Global Product & Platform Management GRC Finance, Risk & Reporting at Wolters Kluwer - Financial Services Solutions

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Previous Episode

How is IOSCO driving a global ESG agenda for securities markets?

Environmental, Social, and Corporate Governance (ESG) are undoubtedly going to remain one of the most high profile topics impacting policy and financial regulation for years to come.

ESG brings with it a whole set of new data, disclosure and reporting requirements meaning there is a great deal of work to do to create new frameworks. There is also a strong agenda among international bodies to create standards that work across borders for investors and issuers of securities alike.

It is against this backdrop that The International Organization of Securities Commissions (IOSCO) is looking to create global ESG reporting guidelines and standards in a bid to make it easier for market participants to identify and compare ESG risks between individual securities and financial products.

In this episode, Paul Andrews, the Secretary General of IOSCO, discusses a wide range of topics such as the fragmentation of ESG standards, data quality issues, working with other global bodies, ESG ratings, greenwashing and the likely timeline for upcoming IOSCO reports and consultations.

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Next Episode

Could central bank digital currencies revolutionise capital markets? A discussion with the Swiss National Bank

The potential introduction of central bank digital currencies (CBDCs) could potentially upend bank business models depending on their design and implementation. It’s a topic, which has implications well beyond monetary policy and the nature of money.

The rapid rise in the popularity of crypto currencies such as bitcoin, Facebook's plans around creating stablecoins backed by existing national currencies and the growing digitisation of financial services has prompted central banks to seriously investigate the viability of introducing CBDCs.

One central bank that has been very active in investigating this area through Project Helvetia, is the Swiss National Bank (SNB) along with its collaborators the Bank for International Settlements and the SIX Exchange.

To gain a better understanding of project Helvetia, the possible impact of CBDCs on capital markets, clearing, foreign exchange and governance we approached Martin Schlegel, an alternate member of the board at the Swiss National Bank for his insights.

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