Banking Law and Climate Change: Key Legal Issues

Mario Tamez, Ender Emre and Alessandro Gullo

No 2024/193, IMF Working Papers from International Monetary Fund

Abstract: This paper explores the intersection of climate change policies with banking supervisory law. Statutory mandates define banking supervisory agencies’ objectives, functions and powers. Policies that aim to address climate change risks appear fully germane to banking supervisors’ main objective of safety and soundness. As such, banking supervisory agencies have a duty to address climate risks in light of their mandate. A mandate that is not anchored on safety and soundness in light of best practice would blur the accountability of banking supervisory agencies and undermine their legitimacy also with respect to climate. While legal changes can help provide greater legal certaintly, particularly given the long-term perspective of climate change, bank supervisory agencies can take action without fundamental reforms of their legal framework. Accordingly, they have set expectations or requirements for banks to incorporate climate into their strategy and business model, risk management, and governance. A combination of legal instruments—based on soft law and hard law—helps to achieve this objective. Notwithstanding implementation challenges, taxonomies and disclosures remain important tools, and banking supervisors should assess their role in the development of such tools in light of their mandate. The key responsibility to address climate risks rests on banks, and corporate governance frameworks could assist.

Keywords: Climate Change; Banking Law; Legal Framework; climate change risk; banking supervisor; corporate governance framework; supervisory agency; climate consideration; Climate policy; Bank legislation; Corporate governance; Global (search for similar items in EconPapers)
Pages: 56
Date: 2024-09-10
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