Greening Central Bank Refinancing Operations

Central bank lending to commercial banks through refinancing operations is a core pillar of the monetary policy toolbox of central banks worldwide.

In that context, several central banks have introduced elements of targeting their refinancing operations to specific economic segments or activities. The use of such targeted refinancing operations (TROs) has been a long-running feature of monetary policy across Asia and has gained further prominence following the financial crisis to address market failures and support financial flows in alignment with policy objectives.

With that in mind, and in view of the growing recognition of climate risks for financial markets in the region, central banks across ASEAN+3 have started introducing TROs aimed at supporting the transition towards a lower-carbon economy and an affordable, secure and clean energy future. TROs offered by the Bank of Japan and the People’s Bank of China are cases in point.

Marthe Hinojales provided an overview of how central banks have started integrating green considerations into monetary policy in general and their refinancing operations in particular across ASEAN+3; Aziz Durrani discussed the greening of collateral frameworks as a central pillar in that context; and Muhammad Qaisar outlined the different design elements of greening refinancing operations.