The TSI (Technical Support Instrument) is operated by the European Commission’s Directorate General for Structural Reform Support (DG REFORM). TAIEX TSI events are organised by DG NEAR in agreement with DG REFORM for the benefit of Member States that are receiving technical support through the TSI.
Biodiversity and ecosystem services underpin all economic activities and human well-being. Yet biodiversity is being destroyed at an unprecedented rate, posing significant risks to the economy and financial sector. Nature-related financial risks are pervasive but poorly understood, and they remain largely invisible and mispriced. These include the dependency of portfolios’ profitability on biodiversity as well as the adverse impacts of financial decisions on biodiversity. Recognising this need, in September 2022 the European Commission launched, together with the Organisation for Economic Co-operation and Development (OECD), and at the initiative of the central bank of Hungary, Magyar Nemzeti Bank (MNB), a project on “Developing a Supervisory Framework for Financial Risks Stemming from Biodiversity-related Losses”. This project is financed by the European Union through the Technical Support Instrument (TSI) and implemented by the OECD, in cooperation with the European Commission's Directorate-General for Structural Reform Support (DG REFORM). The Project aims to develop a supervisory framework to help MNB and other central banks assess biodiversity-related financial risks in the financial system, including transmission channels for physical and transition risks. The Project also aims to help MNB and banks with retail activities in Hungary become more informed about their exposures, impacts and dependencies to biodiversity-related financial risks, and to improve the management of such risks. The Project has been undertaken in two phases:
- Phase 1 resulted in the launch in October 2023 of a Supervisory Framework for Assessing Nature-related Financial Risks, drawing on a mapping of existing tools, practices, definitions, transmission channels, metrics and indicators. This Supervisory Framework is relevant across country contexts for central banks, supervisors and retail banks, while recognising that domestic circumstances and mandates differ.
- Phase 2 has implemented the Supervisory Framework to the Hungarian financial system and one selected retail bank.
The event on 7 June 2024 was open to MNB staff, banks with retail activities in Hungary, other financial actors in Hungary, and to a broader set of central banks and financial supervisors especially in Central and Eastern Europe. It aimed to support the Hungarian financial sector as well as broader EU central banks and financial supervisors, especially in Central and Eastern Europe, by sharing key findings and lessons on the implementation of the Supervisory Framework to the Hungarian financial sector. The event presented the final results (under embargo) of a technical analysis of the nature-related financial risks in the context of the Hungarian financial system, based on the Supervisory Framework for Assessing Nature-related Financial Risks. Furthermore, different regional central banks presented their experiences with similar biodiversity projects.
