MNI BRIEF: Climate Risk To Global FinStab Underestimated - FSB
Climate change may be a greater threat to financial stability than is commonly understood, according to a Financial Stability Board report published Tuesday, with many risk assessment exercises failing to capture substantial risks such as abrupt asset price corrections or to translate into micro- or macro-prudential policy action.
The joint FSB-Network for Greening the Financial System (NGFS) report calls for greater cross-border cooperation and progress on bridging data gaps, particularly at global level.
“This joint report underscores the importance of work to enhance the understanding of the financial system vulnerabilities from climate-related risks, through improved and more forward-looking metrics for assessing financial institutions’ exposures to climate-related shocks,” FSB Chair and Dutch National Bank president Klaas Knot said. “A key priority going forward will be to enhance the understanding of how first-round and second-round effects under different scenarios could give rise to financial stability concerns.”