The Bank of Mozambique (BoM) has launched new mandatory guidelines for financial institutions in the country, which must now integrate climate risk management mechanisms into their financial and non-financial risk assessment processes.
The information is contained in Notice No. _/GBM/2024 published recently and consulted by Diário Económico this Tuesday (11), in which the BoM emphasises the urgency of adapting to the context of climate change in order to mitigate the economic and operational impacts of extreme weather events affecting Mozambique.
In the document, the BoM justifies the new regulations with the ‘need for continuous monitoring of the risks associated’ with major climatic events, which have severely affected the country and the financial sector. Among the new requirements, credit institutions and financial companies will have to identify and assess physical and transition risks that impact their capital and liquidity positions, incorporating these risks as an essential part of their organisational risk management programme.
The notice also states that institutions must implement specific indicators to monitor the impact of climate risks, including stress tests and scenario analyses, which make it possible to simulate the financial resilience of institutions in the face of environmental crises of different scales and intensities.
According to the BoM, the framework for measurement and monitoring should cover both economic sectors and the most vulnerable geographical locations, integrating qualitative and quantitative metrics to assess climate risk on various fronts, including credit, liquidity and operations.
The BoM emphasises that institutions’ top management must establish clear policies and practices for climate risk management, based on detailed six-monthly reports describing the impact of these risks and the effectiveness of the preventive measures adopted.
The notice also stipulates that the new measures come into force 180 days after their publication and directs institutions to submit any doubts to the BoM’s macro-prudential analysis department.
By implementing these rules, the central bank hopes to reduce the financial sector’s vulnerability to extreme weather events, promoting a gradual adaptation of institutions to the context of climate change and ensuring greater resilience in the national financial system.
Text: Felisberto Ruco
