PRA Issues Report on the Impact of Climate Change on UK Banking Sector
PRA published a report that examines the financial risks from climate change that impact UK banks, building societies, and PRA-designated investment firms. The report also assesses how banks are responding to these and clarifies the supervisory approach of PRA. The report finds that physical and transition risks from climate change have financial risk implications, some of which are materializing; this will require more banks to move into the category of strategic oversight. Physical and transition risks materialize into increasing credit, market, and operational risks that can impact the safety and soundness of the UK banking sector.
The report sets out the background and context on the two primary climate-related risk factors—that is, physical and transition. This includes findings from the climate science community and background on the low-carbon transition. The report then examines the financial risks from climate change that impact on the UK banking sector. This includes four specific case studies demonstrating how these risks are becoming relevant to the PRA-regulated banks. It also discusses the distinctive elements of financial risks and how they may evolve. Additionally, the report assesses how banks are responding to and managing the financial risks from climate change through their governance and risk management frameworks. It does this through the lens of the PRA supervisory framework and discusses the transition in thinking observed within the banking sector in its approach to these issues.
A survey of 90% of the UK banking sector, representing over EUR 11 trillion in assets, found that 70% of the banks recognize that climate change poses financial risks. Only 10% manage these risks comprehensively and take a long-term strategic view of the risks. Thirty percent of banks still only consider climate change as a corporate social responsibility issue. With foresight, these climate-related financial risks can be managed in an orderly, effective, and productive manner. While a transition in thinking is taking place, PRA will publish a consultation on its supervisory expectations for banks and insurers. To help consider climate-related financial risks, to share best practice, and to provide intellectual leadership in this emerging field, PRA is also announcing a new Climate Financial Risk Forum with FCA, involving private-sector participants, technical experts, and relevant stakeholders.
The Financial Policy Committee will also consider the system-wide financial risks from climate change and will explore whether climate-related factors should be included in a future Biennial Exploratory Scenarios (BES) stress test. BoE is also engaging closely with other central banks and financial regulators, both domestically and internationally.
Related Links
Keywords: Europe, UK, Banking, Climate Related Risks, Climate Change Risks, BoE, PRA
Previous Article
SEC Proposes Amendments to Codify A Temporary Exemption for NRSROsRelated Insights
|
News
IAIS Publishes Drafts of Revised ICP 8, ICP 15, ICP 16, and ICP 20IAIS published the drafts of revised Insurance Core Principles on Public Disclosure (ICP 20), Investments (ICP 15), Enterprise Risk Management for Solvency Purposes (ICP 16), and Risk Management and Internal Controls (ICP 8), along with a revised draft of the glossary on enterprise risk management (ERM).
November 14, 2018
WebPage
Regulatory News
|
|
News
MAS Amends Notice 637 on Capital Adequacy Requirements in SingaporeMAS published the final, revised Notice 637 on the risk-based capital adequacy requirements in Singapore.
November 13, 2018
WebPage
Regulatory News
|
|
News
ESMA Updates Q&A on Implementation of CSD Regulation and MARESMA updated questions and answers (Q&A) documents on the implementation of the Central Securities Depository (CSD) Regulation and Market Abuse Regulation (MAR).
November 12, 2018
WebPage
Regulatory News
|
|
News
FSB Finalizes and Publishes the Cyber LexiconFSB published a cyber lexicon, following the public consultation earlier this year.
November 12, 2018
WebPage
Regulatory News
|
|
News
SRB Updates Liability Data Reporting Template for 2019SRB published version 2.7.1 of the Liability Data Reporting (LDR) Template.
November 12, 2018
WebPage
Regulatory News
|
|
News
ECB to Conduct Comprehensive Assessment of Six Bulgarian BanksECB will undertake a comprehensive assessment of six Bulgarian banks. The exercise, comprising an asset quality review and a stress test, follows Bulgaria’s submission of a request to establish close cooperation with ECB on July 18, 2018.
November 12, 2018
WebPage
Regulatory News
|
|
News
IMF Publishes Reports on the 2018 Article IV Consultation with ChileIMF published its staff report and selected issues report under the 2018 Article IV consultation with Chile.
November 09, 2018
WebPage
Regulatory News
|
|
News
PRA Issues PS27/18 on Implementing the Extension of SM&CR to InsurersPRA published the policy statement PS27/18, which provides feedback to responses to the consultation paper CP20/18, on implementing the extension of the Senior Managers and Certification Regime (SM&CR) to insurers (Part 2).
November 09, 2018
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: First Update for November 2018EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.
November 09, 2018
WebPage
Regulatory News
|
|
News
FED Finalizes the Large Financial Institution Rating SystemFED finalized the new supervisory rating system for Large Financial Institutions (LFIs), to better align with the current supervisory programs and practices for these firms.
November 09, 2018
WebPage
Regulatory News
|
