Preparing Nepal’s Banks for a Riskier Future
Summary
Nepal Rastra Bank has urged banks and financial institutions to prepare for climate-related, cyber and technology risks as part of a broader risk management framework. The warning comes as disasters like the Bhotekoshi flood show how natural shocks can quickly become financial shocks for borrowers, businesses and lenders.
Key Points
- Nepal Rastra Bank’s new Risk Management Guidelines expand banking risk oversight to include climate change, artificial intelligence, machine learning, cyber threats and operational risks.
- The Bhotekoshi flood is cited as a clear example of how natural disasters can damage borrowers, infrastructure and bank balance sheets through defaults and weaker economic activity.
- Banks are being urged to stress-test loan portfolios, maintain cushions against losses and disclose exposure to climate and technology-related risks.
- The article says Nepal must also strengthen physical infrastructure if it wants lasting financial stability in the face of future disasters.
