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Authored by: Simon Deane and Crystal Choi
In December 2021, the Hong Kong Monetary Authority (HKMA) issued the results of its pilot CRST. The CRST assesses the potential impact of climate change on the Hong Kong banking sector.
The CRST results showed that the extreme climate scenarios assumed in the exercise would lead to a material reduction in the participating banks’ profitability due to an upsurge in expected credit losses from their exposures directly affected by climate change, such as residential mortgages and lending to high-emitting industries. Climate change could also weaken banks’ capital positions.
The HKMA will continue to engage with the industry to support the sector’s capability building to manage climate risks. In particular, the HKMA intends to:
The HKMA intends to undertake a second climate related stress test in two years’ time.
To access the report, please see here.
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