The Hong Kong Monetary Authority (HKMA) has published the Hong Kong Taxonomy for Sustainable Finance, a framework aimed at raising awareness about green finance and promoting a common understanding of green activities. The taxonomy is designed to facilitate green finance flows, align investment decisions with climate goals, and reduce risks associated with non-aligned low-carbon assets. It also aims to unlock new investment opportunities in green technologies and sustainable projects while increasing transparency and accountability in the financial sector.
The report builds on the 2018 BCBS paper titled, “Sound practices: implications of fintech developments for banks and bank supervisors” and takes stock of recent developments in the digitalization of finance. The report reviews key technologies across various aspects of the banking value chain, including banks' use of application programming interfaces (APIs), artificial intelligence (AI) and machine learning (ML), distributed ledger technology (DLT), and cloud computing.
The International Sustainability Standards Board (ISSB) has released the IFRS Sustainability Disclosure Taxonomy, designed to reflect the IFRSS1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRSS2 Climate-related Disclosures, along with their accompanying guidance. This taxonomy provides elements for tagging sustainability-related financial information prepared in accordance with IFRS Sustainability Disclosure Standards. These elements enable companies to tag information about their sustainability-related risks and opportunities in...
The European Union is advancing its regulatory framework for artificial intelligence (AI) with the approval of the EU AI Act by the European Council on May 21, 2024. This comprehensive legislation sets prescriptive, risk-based rules through a common framework for the use and supply of AI systems within the EU. The Act will be published in the Official EU Journal shortly and will come into force 20 days after publication. High-risk systems will have 36 months to comply.
The Basel Committee on Banking Supervision (BCBS) has released guidelines aimed at addressing longstanding weaknesses in counterparty credit risk management within the banking industry. These guidelines emphasize several key practices essential for effective risk mitigation.
The Basel Committee on Banking Supervision (BCBS) has issued a discussion paper outlining the objectives of climate scenario analysis within the Basel framework. According to the paper, climate scenario analysis is described as a forward-looking tool to assess the resilience of business models and strategies of banks.In the discussion paper, the BCBS has identified key features that are crucial for the effectiveness of climate scenario analysis exercises conducted by banks or supervisors. These features include clear objectives, comprehensiveness, plausibility, coherence,...
A vision for the future financial system, outlined in a recent BIS paper, envisions a transformative shift towards a user-centric and unified financial ecosystem. The paper describes the concept of "Finternet" as a digital-era financial system that is inclusive, innovative, participatory, accessible, and affordable for all. It emphasizes leveraging innovative technologies like tokenization and unified ledgers to enhance financial services for users.The authors of the paper highlight three essential components for Finternet: an efficient economic and financial...
In a recent report released by the NGFS, options for the supervisory review of transition plans were outlined, focusing on micro-prudential perspectives. The report builds on previous work and emphasizes the importance of credible transition planning and plans, as well as the role of supervisory authorities in assessing their credibility.The report suggests three potential ways to operationalize the transition plan review process by supervisory authorities. This includes direct monitoring by Micro-Prudential Authorities, reliance on Third-Party Evaluations, and a...
CFIT, the chair of the Open Finance Taskforce, has announced two trial initiatives aimed at providing recommendations to the UK government on unlocking financial data safely. According to a CFIT press release, SME lenders, including Barclays, will collaborate to design and implement open finance solutions to accelerate SME credit assessment and loan decision-making. This initiative is expected to address the GBP 22 billion funding gap that hinders SMEs from investing and innovating.In addition, Citizens Advice (CA) and CFIT will conduct industry-driven pilots in...
The Office of the Superintendent of Financial Institutions (OSFI) has announced the issuance of a Phase 2 consultation on a Climate Scenario Exercise for banks. According to the announcement, the exercise will involve various components including impact assessments on credit and market risks for commercial exposures, as well as evaluations of real estate and physical risk exposures.OSFI stated, "The final versions of these documents as well as a questionnaire (SCSE Questionnaire) will be released in late 2024." The regulator highlighted the importance of completing...
