The objectives of scenario analysis include understanding the impact on individual financial institutions and the financial system as a whole, improving the analytical capacity of both authorities and financial institutions, and identifying data constraints. However, in most countries or regions, the use of scenario analysis is still at the trial stage.
In Japan, the Bank of Japan and the Financial Services Agency (FSA) jointly conducted a pilot scenario analysis exercise with major financial institutions last year, with the results released in August this year.3 The pilot exercise was not intended to provide a quantitative assessment of the impact of climate change on these major financial institutions.