June 21, 2022
Climate Risk and Canadian Banks: Is More Capital Required?
- As regulators generate new rules for financial institutions regarding the monitoring, disclosure and mitigation of climate-related risks, a key issue is: should banks be required to increase their capital buffers?
- Author and C.D. Howe Institute Fellow-in-Residence Glen Hodgson examines this crucial question.
- The Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) recently released scenarios on the implications of climate change and the transition to net-zero greenhouse gas emissions. With this as a backdrop, the author considers Canadian banks’ options for managing climate risk and whether more capital buffers are needed – especially in a country where capital ratios are already well above the regulatory floor.