Following the recent publication of a white paper setting out the Hong Kong Monetary Authority’s (HKMA) initial thoughts on supervisory expectations for the management of climate risks (to read our blog post on this, please click here), the HKMA has issued a circular to provide greater detail on the relevant practices adopted by major banks in managing such risks. The range of practices contained in the Annex to the circular are intended to inspire rather than prescribe how authorized institutions (AI) should develop their framework for managing climate risks. AIs are encouraged to review these.
The HKMA has also indicated that it will invite interested AIs to participate in a pilot climate change stress testing exercise, with a view to assessing the climate resilience of the banking sector as a whole. The HKMA will seek feedback from participating AIs on scope, scenario and outputs, before formally launching the climate change stress testing exercise in 2021. More details about the pilot exercise will be released by the HKMA in due course.