ISDA/IIF on PRA Climate Risk Consultation

ISDA/IIF Responds to the PRA Consultation (CP10/25) on Enhancing Banks’ and Insurers’ Approaches to Managing Climate-Related Risks

Introduction

On July 30th, the International Swaps and Derivatives Association (ISDA) and the Institute of International Finance (IIF) submitted their response to the Prudential Regulation Authority’s (PRA) consultation paper CP10/25. This consultation focuses on enhancing the approaches of banks and insurers in managing climate-related risks, proposing updates to the Supervisory Statement 3/19.

Support for PRA’s Approach

ISDA and IIF have expressed broad support for the PRA’s approach to climate risk management. However, they caution against the implementation of overly prescriptive or bespoke climate-specific requirements. The organizations emphasize the importance of integrating climate risk into existing risk management frameworks rather than creating separate processes.

Flexibility and Global Alignment

A significant theme in the response is the call for flexibility in governance, scenario analysis, reverse stress testing, and data expectations. This flexibility is crucial to accommodate diverse business models and international firms. ISDA and IIF also stress the importance of aligning with global standards and ensuring practical implementation as the PRA finalizes its supervisory statement on climate-related risk management.

Conclusion

As the financial industry continues to grapple with the challenges of climate change, the response from ISDA and IIF highlights the need for a balanced approach that integrates climate risk into existing frameworks while allowing for flexibility and alignment with global standards.

Quelques pistes pour l'intégration opérationnelle dans votre dispositif :

- Intégrer les risques climatiques dans les cadres de gestion des risques existants.

- Assurer la flexibilité dans l'analyse des scénarios et les tests de résistance inversés.

- Aligner les pratiques avec les normes mondiales pour une mise en œuvre pratique.

- Adapter les attentes en matière de données pour les modèles d'affaires diversifiés.

- Encourager une gouvernance flexible pour les entreprises internationales.