Bank of England tells banks to quantify climate risks properly
Reuters
Published Jan 12, 2022 10:30
Updated Jan 12, 2022 13:50
By Huw Jones
LONDON (Reuters) - Banks in Britain should be "ambitious" in properly quantifying risks from climate change or face intervention by regulators if they fall short, the Bank of England (BoE) said on Wednesday.
Banks should also pay particular attention to how they incorporate climate-related risks into business strategies, decision-making and risk-taking, the BoE said in a letter to bank CEOs about its supervisory priorities for the coming year.
"Furthermore, we will keep a range of supervisory tools under review for use where we deem progress to be insufficient," the letter said.
The BoE said most banks were focused on the business opportunities presented by climate change even though it also presents an increasing business risk that is foreseeable and requires action now.
"From 2022, we will incorporate supervision of climate-related financial risks into our core supervisory approach," the letter said.
Branches of foreign banks in London should also focus on climate change and the BoE said it would increase its engagement with their home state supervisors on this issue.
The BoE made similar requests on climate change to insurers in a separate letter, adding they could conduct further research on the potential impact of litigation risk related to climate change, and on the impact of physical risks on assets and liabilities.
The full impact of COVID 19 on insurers' credit portfolios had yet to be felt, the BoE added.
"We expect you to consider the potential impact of general and social inflation on financial resilience across a range of scenarios and factor into prudent reserving decisions," the BoE said.
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.