The Swiss financial market supervision authority, FINMA, will “actively address” financial risks relating to climate change, it said, outlining its strategic goals for 2021-2025.
The regulator has added sustainability to the list of top supervisory activities for the coming years – a brand new goal that was not present in its list set for 2017-2020. It will also concentrate on digitization and innovation.
Its board of directors listed 10 goals for its 2021-2025 strategy approved by the Federal Council.
FINMA stated that, in line with its mandate, it will urge financial institutions to tackle climate-related risks transparently by means of disclosure. It will monitor institutions on their compliance with these requirements.
The authority identified physical climate and climate-related transition risks as elements that can lead to spillover effects into credit, market and operational risks.
It added that climate change, and regulatory changes required to achieve climate goals, can have a impact on the “impairment of certain assets” and on the “frequency of major losses in the insurance sector.”
The authority will be on the lookout for potential new emerging financial risks, it said. Economic and political uncertainties remain high, it noted, while persistent low interest rates impact the future sustainability of business models in financial markets.
Under the new strategy, FINMA will guarantee that the financial system remains “robust” despite structural changes facing the finance industry.
Innovation is a “core element” of FINMA’s strategy, it said, adding that the supervisory activity will tend to adopt a “pragmatic and forward-looking approach” on technology innovations to give a “fair chance on the market” to new business models.
FINMA will also continue to build up supervisory practices to identify opportunities, challenges and risks associated with artificial intelligence and data analytics.
Classic supervisory goals for the next few years include safeguarding the stability of financial institutions.
This will guarantee that banks and insurance companies in particular are capitalised with liquid resources. Capital and liquidity remain the cornerstones for the stability of Swiss financial institutions, it added.
FINMA will cooperate with financial institutions in need of recovery and emergency plans to mitigate the “too big to fail” risk.
The measures taken in recent years with regard to capital and liquidity, however, have allowed the financial sector in Switzerland to fend-off some of the consequences of the COVID-19 pandemic, it said.