Dr. Muhammad Saleem, State Bank of Pakistan

Dr. Muhammad Saleem, State Bank of Pakistan

Conventional Role of Central Banks Regulation of Liquidity Ensuring the Soundness of Financial System Exchange Rate Management And Balance of Payments Managing Payment Systems Specialized Role: Priority sector financing

NEED TO CHANGE FOCUS Two major issues to be focused by Central banks; Financial Inclusion Climate Financing

%age adult population with an Account -2016 100 95 90 80 70 60 50 70 47 62 40 35 30 20 15 17 10 0 High income: OECD East Asia & Pacific Middle East South Asia Sub-Saharan Africa Pakistan World

ADVANCES TO DEPOSITS RATIO 140 120 116 100 95 96 80 60 61 72 75 47 40 20 0 Banks World Wide China United States Japan Europe India Pakistan Source: Indian data http://www.financialexpress.com/article/industry/bankingfinance/credit-deposit-ratio-near-4-year-low/146888/ Other Countries: http://www.statista.com/statistics/276285/loan-to-deposit-ratio-in-the-globalbank-industry/

Green/ Sustainable Banking Green Banking promotes environmental friendly practices in banks in their operations & activities These activities in banks could include: lending to environment friendly projects, promoting resource conservation/efficiency, promoting paper-less environment operating green branches etc

Role of Central Bank in Promoting Climate Investment Enabling Regulatory Framework Market Development Green Banking Guidelines Prudential regulation for project financing Credit Guarantee Facility (Risk sharing ) Public Financing Mechanism Refinance/Credit Line for climate financing Awareness & Capacity Building Capacity building Workshops/Seminars/Conferences

How is banking sector relevant to Climate Change? Banking sector interacts with the environment in two ways: Direct Day to day operations such as use of paper, electricity, stationary, lighting, air conditioning, electronic equipment etc Indirect Through on-lending to business/ industries which include sectors like steel, paper, cement, chemicals, fertilizers, power, textiles etc

Green Banking for Development The motives for adoption of GB exists both for banks as well as regulator(s) i.e. Central Banks For Banks, going green means: Economic benefits, Avoidance of undesired negative publicity from societal groups Compliance with the regulations Corporate Social Responsibility

Enabling Regulatory Framework - Green Banking Guidelines Objectives of Green Banking Guidelines Reduce vulnerability of financial system from risks arising from the environment Facilitate banks/ DFIs to fulfill their responsibilities for protection of environment Encourage financing for transformation of economy into a resource efficient and climate resilient one Scope of Applicability Guidelines will be applicable to all banks and DFIs Guidelines intend to set minimum standards for a fair and competitive environment.

Green Banking Guidelines Key Components of Green Banking Guidelines Responsibilities, Management and Organization Environmental Risk Management Guidelines Guidelines on Green Business Facilitation Guidelines on Own Impact Reduction Responsibilities for Green Banking Board of Directors has overall responsibility including approval of green banking policies, strategies and budgets. The roles and responsibilities of management at all tiers to be aligned with green banking policies

Green Banking Guidelines Environmental Risk Management: EnvRM to be integrated with existing credit risk management policies and procedures EnvRM is applicable for all banking activities and clients EnvRM is for all new exposures & extensions of existing exposures EnvRM be designed to ensure compliance with applicable environmental laws EnvRM should be forward looking Banks/ DFIs to develop internal EnvRM systems, procedures and manuals

Green Banking Guidelines Green Business Facilitation: Green product development Green Financing Portfolio Earmarking of Funds for Green financing portfolio / investments Green advisory service Green Marketing Multilateral Resources for Environmental activities Green Climate Fund

Green Banking Guidelines Own Impact Reduction: Impact Reduction Targets Resource Efficiency Measures Waste Reduction Measures Green Branches/Offices Renewable Energy based ATMs / branches / offices Paperless Banking Operations Green IT Infrastructure

SBP Green Banking Initiatives Regulation of branchless banking SBP s Refinance Scheme for Renewable Energy Scheme for energy efficiency financing Refinance and risk sharing facilities for SME and Agriculture sector Financing for warehouse and solar tube wells for agriculture sector

Partnerships with bilateral & multilateral organizations Member of the Sustainable Banking Network (SBN) Facilitation in Accreditation to Green Climate Fund Awareness and capacity building on Green Banking and RE Scheme

Thank you