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Current FMI Rules “Sufficiently Robust” to Tackle Climate-related Risks

The Depository Trust and Clearing Corporation (DTCC) has published its first-ever analysis examining how climate-related financial risk may directly impact financial market infrastructures (FMIs). The paper said that FMIs’ business continuity programmes have proven to be sufficiently robust in mitigating direct exposure to climate-related physical risk, despite them being more exposed than other financial services institutions. In relation to transition risk, the paper notes that FMIs’ exposures are “indirect” via their exposures to financial institutions that have more direct transition risk exposure through financing activities of specific carbon-intensive companies. The DTCC has called on regulators and policymakers to continue working on standardising robust disclosure requirements across the financial services industry to help FMIs perform meaningful assessments of their clearing members’ climate-related financial exposures and internal risk controls as part of the FMIs’ counterparty credit risk monitoring activities. The corporation will add climate-related trending metrics to its existing programmes to improve its own risk management capabilities, as well as looking to incorporate climate-related risk monitoring as part of its overall approach to assessing counterparty exposure, compliance, controls, and governance. 

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