Basel Committee clarifies how climate-related financial risks may be captured in the existing Basel Framework

Press release  | 
08 December 2022
  • Basel Committee issues responses to frequently asked questions (FAQs) to clarify how climate-related financial risks may be captured in the existing Basel Framework.
  • Clarifications intended to facilitate consistent interpretation of existing Pillar 1 standards given the unique features of climate-related financial risks and should not be interpreted as changes to the standards.
  • Part of the Committee's ongoing and holistic approach to addressing climate-related financial risks to the global banking system.

The Basel Committee on Banking Supervision today published responses to frequently asked questions to clarify how climate-related financial risks may be captured in existing Pillar 1 standards.

Consistent with the objective of FAQs, the responses are intended to facilitate a globally consistent interpretation of existing standards given the unique features of climate-related financial risks and should not be interpreted as changes to the standards. The responses are consistent with the Basel Committee's Principles for the effective management and supervision of climate-related financial risks.

Banks should consider how to incorporate climate-related financial risks in their interpretation and application of the existing Basel Framework, and continuously develop their capabilities and expertise in relation to climate-related financial risks. Where appropriate, the responses explicitly acknowledge data limitations and recognise that practices will evolve iteratively over time, and therefore allow for flexibility while promoting a globally consistent implementation of the Basel Framework.

The FAQs are part of the Committee's work addressing climate-related financial risks to the global banking system in support of its mandate to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.

In pursuing this work, the Basel Committee is examining the extent to which climate-related financial risks can be addressed within the Basel Framework, identifying potential gaps in the current framework and considering possible measures to address them. This on-going work is holistic in nature, spanning regulation, supervision and disclosure.