BoE to Launch Climate Biennial Exploratory Scenario Exercise in June
BoE announced plans to launch the Climate Biennial Exploratory Scenario (CBES) in June 2021, with the publication of scenarios for this exercise. In December 2020, BoE will inform participants about the high-level approach for the CBES in a number of key areas, including counterparty exposure data. It will also release a provisional set of scenario variables to be included in the exercise. BoE plans to release a set of draft data templates as well as a draft qualitative questionnaire for feedback from participants in February 2021, with the BoE expecting to release a finalized set of data templates and qualitative questionnaire. in April 2021. End of December 2020 will be the balance-sheet cut-off date for the exercise, with the participants' initial submissions due by the end of September 2021.
These decisions reflect feedback that BoE received following the publication of its December 2019 discussion paper on design of the 2021 biennial exploratory scenario on the financial risks from climate change. In addition to the Society of Lloyd’s (10 selected Managing Agents), the following institutions are being invited to take part in this exercise:
Large UK banks and building societies |
Large UK life insurers |
Large UK general insurers |
|---|---|---|
|
Barclays |
Aviva (Group) |
Aviva (Group) |
|
Lloyds Banking Group |
Legal & General (Group) |
Direct Line (Group) |
|
HSBC |
M&G (Group) |
RSA (Group) |
|
Royal Bank of Scotland |
Phoenix (Group) |
AXA (UK entity only) |
|
Santander UK |
Scottish Widows (Group) |
Allianz (UK entity only) |
|
Standard Chartered |
AIG (UK entity only) |
|
|
Nationwide Building Society |
BoE will use the 2021 biennial exploratory scenario to explore the financial risks posed by climate change. The exercise will test the resilience of the current business models of the largest banks, insurers, and the financial system to climate related risks and, therefore, the scale of adjustment that will need to be undertaken in coming decades for the system to remain resilient. In December 2021, BoE plans to announce the decision on whether to run a second round of the exercise. In the event of a second round, BoE will publish results at the end of the first quarter of 2022.
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Keywords: Europe, UK, Banking, Insurance, Stress Testing, ESG, CBES, Climate Biennial Exploratory Scenario, Climate Change Risk, Implementation Timeline, BoE
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