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BFSI Chronicle, 11 Edition September2022
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climate-related risks and incorporate those risks into In addition, banks should assess whether climate-
internal capital assessment processes. Banks should related risks could cause net cash outflows or
consider these risks over multiple time horizons when depletion of liquidity buffers, assuming both
calculating how much capital is required. business-as-usual and stressed conditions.
Banks should ensure their internal reporting systems Conclusion:
are capable of monitoring climate-related risks, and The global understanding of the systemic impact
banks’ risk data aggregation capabilities should of climate change on the economy and the financial
account for these risks. Likewise, banks should system as also its resultant impact on financial
consider how climate-related risks will impact stability is evolving and, accordingly, the responses
different areas of their business, including: of central banks and supervisors around the world
have also been developing. The private and the public
Credit Risk Profiles sector need to build on our early progress, both by
recognizing what we do know and urgently filling
Market Positions in the gaps around what we do not.
Liquidity Risk Profiles, and References:
1. RBI Principles on “Financial Risks Stemming from
Operational Risk. Climate Change”.
Finally, banks should use scenario analysis to 2. BIS Principles “Climate-related Financial Risk”
determine the impact of climate-related risks on their
business. Banks should also use scenario analysis to
assess their climate-risk strategies.
The Institute Of Cost Accountants Of India
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