This session will present the findings of a research report on the Basel Capital Accord (‘Basel III’) and its treatment of environmental risks in the context of its overriding objective of banking stability. The role of the financial system in the economy and broader society is to provide the necessary financing and liquidity for human and economic activity to thrive – not only today but also tomorrow. In other words, its role is to fund a stable and sustainable economy. The role of financial regulators is to ensure that excessive risks that would threaten the stability of the financial system – and hence imperil the stability and sustainability of the economy – are not taken. In the wake of the 2007-08 financial crisis, an extensive reform of banking regulation was initiated to “generate strong, sustainable and balanced global growth”.
Elements for the debate:
- Are there linkages between environmental risks and banking sector stability - are environmental risks material?
- Do the Basel Accords duly consider environmental risks?
- What is the current state of practice in banking supervision in this field?
- What more could be done to allay environmental risks within the mandate and framework of the Accords?