Indonesia Financial Services Authority (OJK) released the Climate Risk and Banking Resilience Assessment (CBRA) as a strategic means to fortify the national banking sector resilience against climate changes risks. The initiative is a part of risk-based policy strengthening measure to maintain financial system stability as well as promoting sustainable finances development in Indonesia.
CBRA publication reflects OJK's commitment in ensuring that the national banking actively partakes in campaigning for the low-carbon economy transformation in addition to enhancing resilience against transition and physical risks from climate changes. Financial system resilience is a major foundation in maintaining stability, sustaining economic growth, and nurturing common welfare in the long term.
CBRA provides a comprehensive assessment on the impact of climate-related risk in Indonesia's banking sector over the short, medium, and long-term. Using a quantitative and forward-looking approaches, the assessment estimates the potential impact on assets quality, profitability, and capital adequacy across the banking industry and evaluates the capital buffers' sufficiency in absorbing pressures from risks prompted by the transition processes and the physical impact of climate changes.
The framework also strengthens Climate Risk Management and Scenario Analysis (CRMS) implementation as a foundation of climate risk supervision in the banking sector. The assessment results show that in aggregate, Indonesia banking sector has adequate capital capacity in facing pressures of climate risks in managed scenarios of transition. However, the development of global and domestic dynamics demands the industry's preparedness and systematic integration of climate risk within baking governance, risk management, and business strategy.
Going forward, OJK will continue to enhance its adaptive supervisory framework, improve the transparency of banks' exposures to carbon-intensive sectors, further develop the CRMS methodology, and promote development of more targeted transition financing policies in alignment with the 2060 Net Zero Emissions target. Through these initiatives, banks are also expected to not only maintain financial stability, but to serve as the catalyst of Indonesia's sustainable economic transformation and to build resilience to climate risks.
For more information, please contact:
Mr. Nuki Suprayitno (nuki.suprayitno@ojk.go.id)
Ms. Silvia Adhiarahmawati (silvia.adhia@ojk.go.id)
Download the attached file to read the Climate Risk and Banking Resilience Assessment.
