Canada: towards an increase in the minimum reserve of banks for climate risks

The head of Canada’s banking regulator said on Monday he would increase the reserve that banks must keep to protect themselves against climate change risks.

Peter Routledge, who heads the Office of the Superintendent of Financial Institutions (OSFI), explained that the hike is unlikely to be imposed this year, but it is still important for banks to provide capital buffers in the current decade. to guard against potentially increasing volatility.

Speaking at the CEOs Conference of Canadian Banks hosted by the Royal Bank, Mr. Routledge argued that it is important to increase resilience to the physical risks of climate change and the risks of transition, so that the global economy is moving towards carbon neutrality.

Even if the world started cutting emissions this decade with a more measured approach, he said, action could be delayed until the next decade, resulting in a more precipitous and volatile transition.

Mr. Routledge explained that OSFI will also be entering into a dialogue with financial institutions and hoped to be able to produce guidance on climate risk management later this year.

Royal Bank CEO Dave McKay said it is essential that any financial policy on climate change risks take into account Canada’s global competitiveness.

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