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Philippines: Banks told to integrate sustainability principles
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has ordered banks to integrate sustainability principles in their investment activities to ensure continued safety and soundness.
BSP Governor Felipe Medalla said the regulator recognizes the potential of banks’ investment activities to contribute to the pursuit of sustainable and resilient growth in the Philippines.
In line with the implementation of the Sustainable Finance Framework issued in April 2020, Medalla said the Monetary Board has issued Resolution 1180 on Aug. 11 approving the supervisory expectations on the integration of sustainability principles in the investment activities of banks.
“These guidelines set expectations on the prudent conduct of investment activities and the minimum practices that a bank should establish for the management and control of risks associated with investments,” Medalla said.
The BSP chief said the guidelines likewise set expectations on the integration of sustainability principles in investment processes of banks.
According to the regulator, the guidelines cover all of a bank’s investments in the trading and banking books, but do not apply to bank’s investments that grant control over an enterprise and are accounted for using the equity method, transactions in derivatives involving stand-alone contracts, as well as receivables arising from repurchase agreements.
The government’s sustainable finance framework covers environment and social risk management system, credit risk management system, investment activities of banks, and operational risk management system.
Through Circular 1149, Medalla said banks should have systems to manage risks arising from their investment activities through board and senior management oversight, policies, procedures, and limits as well as risk measurement, monitoring, and management information systems.
“Given the impact of investments on the risk profile of an institution, banks shall ensure that they possess the capability to measure and monitor the risks associated with their investments prior to acquisition and periodically thereafter,” the BSP said.
It added that a bank should have the capability to value its positions and measure exposures to each type of risk arising from such positions under both normal and stressed market conditions.
Likewise, a bank whose investments are exposed to material environmental and social risks should adopt appropriate tools and metrics to assess, measure, and monitor these risks in accordance with the requirements.
Source: https://www.philstar.com/business/2022/08/29/2205778/banks-told-integrate-sustainability-principles