Bangladesh Bank’s first climate stress testing report reveals that the banking sector faces increasing loan losses and financial instability if swift climate action is not implemented. The report highlights the link between climate-induced GDP slowdowns and a rise in non-performing loans, emphasizing that higher damage climate scenarios would lead to greater loan losses. To mitigate these risks, the BB recommends that banks integrate climate risk into their strategies, improve data collection, and enhance their risk management frameworks. While suggesting increased awareness and capacity building, the central bank advises against immediate stricter capital requirements.
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