TITLE: Turkey's Banking Regulation and Supervision Board Issues Climate-Related Financial Risk Management Guideline
BODY:
On March 13, 2025, the Banking Regulation and Supervision Board (BRSA) issued a best practice guideline on the management of climate-related financial risks for banks operating in Turkey. The guideline establishes baseline principles for banks to manage exposures and potential impacts of climate-related financial risks through policies, processes and controls across all relevant functions and business units.
The guideline defines climate-related financial risks as risks arising from both physical and transition factors. Physical risks include acute risks from natural events such as floods and wildfires, and chronic risks from sustained shifts in climate patterns. Transition risks arise from changes in policy, regulation, technology and consumer behaviour during the adaptation to a low-carbon economy. The guideline applies on a proportionate basis depending on each bank's size, corporate structure, complexity and scope of activities.
The guideline establishes 12 core principles covering corporate governance, internal systems, capital and liquidity adequacy, risk management processes, monitoring and reporting, credit risk management, market and liquidity risk management, operational risk management, and scenario analysis. Banks must develop sound processes to understand and assess climate-related risk impacts on their businesses, clearly assign climate-related responsibilities to board members and committees, and embed climate risk management across all relevant functions. Banks should identify and quantify material climate-related financial risks and incorporate them into internal capital adequacy assessment processes and stress testing programmes. The guideline requires banks to establish key risk indicators, develop data aggregation capabilities for climate-related risks, and conduct scenario analysis to assess business model resilience to various climate pathways.
The guideline enters into force on July 1, 2025.