BSP Now on Its Third Phase of Sustainability-Related Regulationsby Fintech News Philippines July 12, 2022
The Bangko Sentral ng Pilipinas (BSP) is now on its third phase of sustainability-related regulations with the recent release of draft guidelines on the integration of sustainability principles in banks’ investment activities.
The central bank said that the finalisation of this policy proposal is targeted for August 2022.
The first and second phases were marked by issuances of the Sustainable Finance Framework in April 2020 and the Environmental and Social Risk Management Framework in October 2021, respectively.
These regulations set out the expectations on the integration of sustainability principles in banks’ core strategies, governance, and risk management frameworks, especially in the areas of credit and operational risks.
These rules also embed the principle of proportionality, which takes into consideration a bank’s size, risk profile, and complexity of operations.
To help banks understand the sustainable finance concepts and promote adoption of sustainable practices, BSP is collaborating with industry associations, development partners, and other interest groups on the rollout of capacity-building activities for banks and other financial institutions.
BSP also reports that transition plans submitted by banks over the past six months indicate that they are making good use of the three-year transition window provided by the Sustainable Finance Framework.
In collaboration with the World Bank, BSP is leading a stress testing exercise that will assess the potential impact of climate transition risk to the banking system.
BSP will enhance its data collection tools to facilitate the assessment of climate- and other environment-related financial impact.
It will also supplement existing regulations on stress testing with guidelines that integrate climate stress testing design.
Moreover, BSP is looking into potential regulatory incentives to further mainstream sustainable finance.
In relation to this, BSP supports amendments to the Agriculture and Agrarian Reform (Agri-Agra) Law which consider engagement in sustainable finance as compliance with the mandatory agri-agra credit.
BSP will soon release its 11-point strategy to implement the Sustainable Central Banking Programme.
“The BSP recognises the urgency of promoting the sustainability agenda. We are committed to helping our supervised financial institutions develop their capacity in sustainable finance.
This enabling approach will accelerate mobilising funds toward projects and activities to achieve our growth targets and, at the same time, reinforce the country’s resilience to natural disasters and climate change,”
said Felipe M. Medalla, Governor of BSP.