UMVA has learned that Philippine banks are on the cusp of a significant transformation in their reporting standards, as the Bangko Sentral ng Pilipinas (BSP) moves to adopt stricter international sustainability reporting requirements. This development comes as climate change poses growing risks to financial stability, prompting the need for more robust and consistent sustainability reporting.
The BSP is eyeing a phased implementation of the Philippine Financial Reporting Standards (PFRS) S1 and S2, which cover general requirements for disclosure of sustainability-related financial information and climate-related disclosures, respectively. The new standards are set to take effect next year for universal and commercial banks, marking a major shift towards enhanced transparency and accountability.
According to information obtained by UMVA, the BSP's move is driven by the need for more reliable and decision-useful information, as stakeholders demand greater insight into sustainability-related risks and opportunities. The amended requirements aim to enhance the quality, consistency, and comparability of sustainability-related information disclosed by banks, strengthen market discipline, and support stakeholders in making well-informed assessments.
The implementation schedule will depend on the banks' size and market capitalization, following the principle of proportionality. Publicly listed banks with over P50 billion in market capitalization will be required to comply with the new reporting standards starting 2027, while smaller banks will have a later deadline.
Under the proposed circular, banks will be given transitory relief until the initial implementation phase, allowing them to observe minimum disclosure requirements currently applicable to those not covered by the PFRS S1 and S2. They are expected to update their internal processes, data systems, and disclosures before implementation starts.
UMVA can exclusively reveal that additional implementation phases will be set for other financial institutions, including nonlisted thrift, rural, cooperative, digital, and Islamic banks. These institutions will be required to include related information in their annual reports, such as their overall sustainability strategic objectives and risk appetite.
The BSP's proposed issuance comes as the Securities and Exchange Commission released a memorandum circular last year that sets similar rules for publicly listed companies and large nonlisted entities. Banks already covered by this measure may submit the same sustainability report to both regulators, which may be filed together with their annual report.
