Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has issued policy guidelines for green banking aiming to protect environmental degradation and ensure sustainable banking practices, officials said.
“Green banking policy needs to be covered through a timeframe which will be segregated into three phases,” the Bangladesh Bank (BB), the country’s central bank, said in its guidelines, issued on Sunday. The guidelines would be implemented during the period between December 31 this year and December 31, 2013 in three phases.
Under the guidelines, the banks will formulate and adopt broad environmental or green banking policy and strategy approved by their boards of directors.
A high powered committee comprising directors from the board in case of scheduled Bangladeshi banks and a high powered committee comprising regional chiefs of global offices and members from the top management including CEOs in case of foreign banks should be responsible for reviewing the banks’ environmental policies, strategies and programs.
The banks will approve a considerable fund in their annual budget allocation for green banking.
“Banks shall comply with the instructions stipulated in the detailed guidelines on environmental risk management (ERM) in consideration of a part of the green banking policy,” the guideline said, adding that the banks will incorporate environmental and climate change risk as part of the existing credit risk methodology prescribed to assess a prospective borrower.
The guidelines also said the banks should take steps to save energy from corporate business travel and encourage employees to purchase energy- efficient cars (that consume less fuel) that can reduce gas and petroleum consumption.
“Eco-friendly business activities and energy efficient industries will be given preference in financing by banks. Environmental infrastructure such as renewable energy projects, clean water supply projects, wastewater treatment plants, solid and hazardous waste disposal plants, bio-gas plants, bio-fertilizer plants should be encouraged and financed by banks,’’ it added.
The banks should determine a set of achievable targets and strategies, and disclose these in their annual reports and websites for green financing and in-house environment management as well.
“The BB will award points to banks on management component while computing CAMELS rating, where there will ultimately be a positive impact on overall rating of a bank,” it noted.
The central bank will declare the names of the top ten banks for their overall performance in green banking activities on its website, the guidelines said, adding that it would actively consider green banking activities/practices of a bank while giving permission for opening new bank branches.
BBN/SI/AD-27Feb11-8:51 pm (BST)
