{
  "title": "Iceland: Financial Sector Assessment Program-Technical Note on Management and Supervision of Climate-Related Financial Risks in the Banking Sector",
  "publication": "IMF Staff Country Reports, July 28, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2023/07/26/iceland-financial-sector-assessment-program-technical-note-on-management-and-supervision-of-537023",
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  "summary": "This technical note on Iceland presents analyses management and supervision of climate-related financial risks in the banking sector. The Icelandic authorities are committed to addressing climate change issues and reaching ambitious objectives to reduce greenhouse gas emissions.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The technical note analyzes management and supervision of climate-related financial risks in the Icelandic banking sector.\n- Icelandic authorities are committed to addressing climate change issues and reaching ambitious objectives to reduce greenhouse gas emissions.\n- The Central Bank of Iceland (CBI) has begun incorporating climate-related financial risks into macroprudential surveillance and supervisory processes."
    },
    {
      "heading": "Major findings",
      "content": "- Domestic coordination with the Central Bank of Iceland (CBI) should be enhanced to support adequate consideration of climate-related financial risks within the financial sector.\n- CBI faces data quality and availability issues on climate-related financial risks that should be addressed as soon as possible.\n- The intensity and thoroughness of systematic supervision of climate-related financial risks within the banking sector should be gradually increased.\n- Banks have made commendable efforts toward transparency but should fully incorporate climate-related financial risks into their risk management frameworks.\n- CBI should determine whether banks’ capital and liquidity buffers are adequate to cover climate-related financial risks."
    },
    {
      "heading": "Policy recommendations",
      "content": "- Enhance domestic coordination with CBI to ensure climate-related financial risks are adequately considered across the financial sector.\n- Prioritize resolving data quality and availability issues on climate-related financial risks at CBI as soon as possible.\n- Gradually increase the intensity and thoroughness of systematic supervision of climate-related financial risks in the banking sector.\n- Require banks to fully integrate climate-related financial risks into risk management frameworks beyond current transparency efforts.\n- Assess whether existing capital and liquidity buffers at banks are sufficient to cover climate-related financial risks."
    },
    {
      "heading": "Supervisory and bank actions",
      "content": "- CBI has started to integrate climate-related financial risks into macroprudential surveillance and supervisory processes, marking an initial step in supervisory practice.\n- Banks should move from transparency toward full operational integration of climate-related financial risks in their risk management and internal controls.\n- Supervisory focus should shift to more systematic and thorough oversight, including evaluation of capital and liquidity adequacy relative to climate-related financial exposures.\n\nInternational Monetary Fund. Iceland: Financial Sector Assessment Program-Technical Note on Management and Supervision of Climate-Related Financial Risks in the Banking Sector.\n\n---\n\n Content in this bundle\n\n- 1islea2023005\n  - 1islea2023005 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1islea2023005 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: July 28, 2023",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400248955.002",
    "The technical note analyzes management and supervision of climate-related financial risks in the Icelandic banking sector.",
    "Icelandic authorities are committed to addressing climate change issues and reaching ambitious objectives to reduce greenhouse gas emissions.",
    "The Central Bank of Iceland (CBI) has begun incorporating climate-related financial risks into macroprudential surveillance and supervisory processes.",
    "Domestic coordination with the Central Bank of Iceland (CBI) should be enhanced to support adequate consideration of climate-related financial risks within the financial sector.",
    "CBI faces data quality and availability issues on climate-related financial risks that should be addressed as soon as possible.",
    "The intensity and thoroughness of systematic supervision of climate-related financial risks within the banking sector should be gradually increased.",
    "Banks have made commendable efforts toward transparency but should fully incorporate climate-related financial risks into their risk management frameworks.",
    "CBI should determine whether banks’ capital and liquidity buffers are adequate to cover climate-related financial risks.",
    "Enhance domestic coordination with CBI to ensure climate-related financial risks are adequately considered across the financial sector.",
    "Prioritize resolving data quality and availability issues on climate-related financial risks at CBI as soon as possible.",
    "Gradually increase the intensity and thoroughness of systematic supervision of climate-related financial risks in the banking sector.",
    "Require banks to fully integrate climate-related financial risks into risk management frameworks beyond current transparency efforts.",
    "Assess whether existing capital and liquidity buffers at banks are sufficient to cover climate-related financial risks.",
    "CBI has started to integrate climate-related financial risks into macroprudential surveillance and supervisory processes, marking an initial step in supervisory practice.",
    "Banks should move from transparency toward full operational integration of climate-related financial risks in their risk management and internal controls.",
    "Supervisory focus should shift to more systematic and thorough oversight, including evaluation of capital and liquidity adequacy relative to climate-related financial exposures.",
    "**1islea2023005**"
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