Brasil Business news

Brazil’s banks to include local weather change dangers into stress checks

A view exhibits the central nank headquarters constructing in Brasilia, Brazil August 25, 2021. REUTERS/Amanda Perobelli/File Photograph

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SAO PAULO, Sept 15 (Reuters) – Brazil’s central financial institution introduced on Wednesday new guidelines making it obligatory for banks to include local weather change-related dangers, equivalent to droughts, floods and forest fires of their stress checks, beginning in July 2022.

Central financial institution director Otavio Damaso mentioned the brand new regulation goals to keep away from potential monetary instability stemming from climate-related dangers. Nonetheless, for now the central financial institution is not going to require further capital to cowl for potential climate-change associated dangers, leaving that call to banks.

The transfer places Brazil’s central financial institution among the many rising ranks of economic regulators demanding climate-related motion from banks. A number of international locations, together with France and the Netherlands, have already launched stress checks incorporating climate-change associated dangers, and lots of others are within the pipeline, in response to the Monetary Stability Institute. learn extra

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Brazil’s central financial institution is just not prohibiting lenders from extending any loans, however the climate-change associated danger evaluation may make credit score strains dearer for sure firms and sectors if banks discover it essential to allocate extra capital to imagine the dangers they’ve recognized.

In April 2022, the regulator plans to launch its personal stress checks for climate-change associated dangers, incorporating all banks below the identical danger standards.

The regulator additionally made it obligatory for banks to reveal climate-related data as a part of monetary reporting by July 2022, in accordance with the Process Pressure on Local weather-Associated Monetary Disclosures (TCFD), arrange by the G20’s Monetary Stability Board tips.

The central financial institution additionally introduced guidelines forbidding rural loans to tasks on indigenous land or in sure areas within the Amazon biome. Nonetheless, it delayed the creation of a “sustainable mortgage” stamp for tasks that comply with finest environmental practices.

Central financial institution officer Claudio Filgueiras mentioned the regulator continues to be discussing that framework with the agribusiness sector, which has criticized the proposed guidelines. In feedback despatched to the central financial institution in Could, some foyer teams mentioned the regulation may harm important financing.

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Reporting by Carolina Mandl
Enhancing by Jane Merriman, Brad Haynes and Chris Reese

Our Requirements: The Thomson Reuters Belief Ideas.

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