Growing impact of ESG turns spotlight on banks’ capital requirements

REGULATORS of South-east Asia’s banks have applied a relatively light touch when it comes to environmental, social and governance (ESG) requirements. But some observers believe capital requirement regulations for the region’s banks should reflect ESG risks.

In Europe, the ESG agenda is already having a big impact on banking regulations.

Discussions on strengthening capital requirements for banks to steer finance towards ESG-friendly industries, for instance, are ongoing in the European Union, although the chair of the European Banking Authority Jose Manuel Campa recently hinted that adjustments are not likely.