Taiwan’s Banks Face Mandatory Climate Stress Tests Next Year

A pedestrian passes the Taipei 101 building in Taipei, Taiwan, on Tuesday, May 24, 2022. US President Joe Biden is seeking to show US resolve against China, yet an ill-timed gaffe on Taiwan risks undermining his bid to curb Beijing’s growing influence over the region. Photographer: Lam Yik Fei/Bloomberg , Bloomberg

Miaojung Lin and Chien-Hua Wan, Bloomberg News

Jun 8, 2022

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(Bloomberg) -- Taiwan’s banks will undergo mandatory climate-change stress tests for the first time next year to measure the impact of a range of possible environmental catastrophes on the lenders’ assets. 

The content of the tests will be finalized before the end of this year, Roger Lin, deputy head of the Financial Supervisory Commission’s Banking Bureau, said in an interview Tuesday. The financial regulator plans to conduct the tests over the first half of 2023 with the the results to be published in June. 

The FSC has authorized Taiwan’s banking association to develop the tests, which are to be submitted to the regulator for approval by the end of September. 

Some institutions, including CTBC Financial Holding, Fubon Financial Holding and Cathay Financial Holding, have already started to prepare, examining the risks to real estate assets of rising sea levels or to loan portfolios exposed to industries especially vulnerable to climate change, according to statements on their websites. 

Climate change and the government policies aimed at mitigating it are growing priorities for financial authorities around the world. The Bank of England warned last month that UK banks and insurers could see climate-related losses of as much as £334 billion over the next three decades following the central bank’s first ever stress tests.

Not everyone agrees. Stuart Kirk, the head of responsible investing at HSBC Holdings Plc’s asset management unit criticized environmental “hyperbole” at an event hosted by the Financial Times in May, adding that that climate change is not a financial risk worth worrying about. His comments have since been widely condemned, and HSBC has suspended him.

Taiwan stands to be particularly hard hit by unmitigated climate change. Higher temperatures portend stronger typhoons and more severe droughts, the Ministry of Science and Technology said in a March statement. They could also threaten as much as 20% of the rice harvest and encourage the breeding of yellow fever mosquitoes, which can spread Zika, dengue fever and other diseases. 

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