Bank of Korea to Share 'Climate Risk Measurement Techniques' with Banks and Insurers

13 out of 20 Banks and 21 out of 42 Insurance Companies to Participate
Focus on Sharing Climate Risk Measurement Techniques with Small and Medium-Sized Institutions

The Bank of Korea announced on May 14 that it will hold a 'Climate Stress Test Workshop' for banks and insurance companies in order to strengthen domestic financial institutions' capacity to manage climate risk.

Bank of Korea building. Bank of Korea

Of the 20 domestic banks, 13 will participate, while 21 out of 42 insurance companies will take part. Among them, eight banks and 16 insurance companies did not participate in the '2024-2025 Joint Financial Sector Climate Stress Test.'

Recently, the implementation of climate stress tests to quantify potential losses arising from climate risk has been spreading, especially among major domestic financial institutions. Last year, seven domestic banks?KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, iM, and Busan?and seven insurance companies?Samsung Life, Samsung Fire & Marine, Kyobo Life, Hanwha Life, Shinhan Life, Hyundai Marine & Fire, and KB Insurance?jointly conducted a climate stress test with the Bank of Korea and the Financial Supervisory Service, and announced the results in March this year.

However, most small and medium-sized financial institutions have not been able to conduct climate stress tests due to a lack of human resources and expertise. The Bank of Korea explained, "To strengthen the capacity of domestic financial institutions to assess and manage climate risk, we are holding a workshop focused on sharing climate risk measurement techniques with small and medium-sized financial institutions."

During the workshop, the structure, calculation methodology, and estimation results of the 'climate change scenario' jointly developed by the Bank of Korea, the Financial Supervisory Service, and the Korea Meteorological Administration in November last year will be introduced. Participants will also practice climate stress testing by estimating each financial company's climate risk (such as expected losses). Trends in domestic and international climate disclosure regulations will be presented, and ways to utilize the results of climate stress tests in disclosures will be suggested. If requested by financial companies, the Bank of Korea also plans to provide one-on-one technical support for building individual institutions' own climate risk assessment models.