Status: Will be live at 08/03/2022 11:15
IIF Responds to EBA Discussion Paper on Environmental Risks
The IIF submitted a comment letter to the European Banking Authority (EBA) Discussion Paper on the role of environmental risks in the prudential framework.
The letter is based on the IIF Climate and Capital paper and highlights shared views with the EBA and areas that the EBA should further consider. For the former, the IIF commends adherences to a risk-based approach; opposition to the introduction of specific risk-weighted adjustment factors (e.g., Green Supporting Factor, Brown Penalizing Factor); recognition regarding challenges associated with the longer time horizon and forward-looking perspective; importance of other policy instruments outside the prudential framework (e.g., carbon pricing). For the latter, the IIF quoted the Climate and Capital paper's relevant key messages; lack of concrete evidence to support the use of regulatory capital adjustments to address climate-related risks; unintended consequences which could be caused by premature Pillar 1 and Pillar 2 adjustment; and necessity of international harmonization.