Regulatory Alerts2021-12-30
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Guidelines for Banking Sector Climate Risk Stress Test
The Hong Kong Monetary Authority issued a letter detailing the results of a pilot climate risk stress test conducted with twenty-seven major banks to assess the sector's resilience. The exercise revealed that climate risks could significantly increase expected credit losses and reduce profitability, although the sector remains resilient due to strong capital buffers. The HKMA plans to address identified data and methodology gaps by enhancing the framework and collaborating with overseas authorities, with a second stress test intended in two years.
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