Featured Product

    PRA Finalizes Policy on Approach to Managing Climate Change Risks

    April 15, 2019

    PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix). PS11/19 also provides feedback to responses to the consultation paper (CP23/18) on banks’ and insurers’ approaches to managing the financial risks from climate change. Additionally, PRA published a speech by Sarah Breeden, Executive Director for International Banks Supervision at PRA, on how the financial risks from climate change are far-reaching, foreseeable, and require immediate action.

    PS11/19 is relevant to all UK insurance and reinsurance firms and groups within the scope of Solvency II and non-Solvency II firms (collectively referred to as insurers), banks, building societies, and PRA-designated investment firms. The comment period for the consultation on climate change risks (CP23/18) ended on January 15, 2019. PRA had received 54 responses and the respondents generally welcomed the proposals in CP23/18. In addition to some respondents urging PRA to move more quickly and decisively on climate change issues, there were a number of requests for clarification. Feedback to these responses has been set out in Chapter 2 of PS11/19. After considering the comments received, PRA has made the following changes to the expectations in the SS3/19:

    • Provided more clarity on the timescales appropriate for scenario analysis
    • Updated the wording of the disclosure expectations in response to requests for clarification
    • Clarified that financial positions related to climate vulnerable assets cannot always be hedged; thus, firms should not rely on that assumption

    SS3/19 describes the two risk factors through which financial risks from climate change arise and the distinctive elements which, when considered together, present unique challenges and require a strategic approach. Chapter 3 of SS3/19 sets out the PRA expectations concerning this strategic approach. The expectations in SS3/19 take effect on publication of this PS11/19. PRA expects firms to have an initial plan in place to address the expectations and submit an updated Senior Management Function (SMF) form by October 15, 2019. However, firms should note that expectations on firms and SMF holder(s) will take into consideration the evolving understanding of what best practice looks like. PRA intends to publish more detailed expectations in due course.

    PRA and FCA have established the Climate Financial Risk Forum (CFRF), with the aim of supporting the integration of climate-related factors into financial decision making, for example, by developing analytical tools and techniques. The policy set out in PS11/19 has been designed in the context of the existing U.K. and EU regulatory framework. PRA has assessed that the policy will not be affected in the event that UK leaves EU with no implementation period in place.


    Related Links

    Effective Date: April 15, 2019 (SS3/19)

    Keywords: Europe, UK, Banking, Insurance, Climate Change Risks, PS11/19, CP23/18, SS3/19, PRA

    Featured Experts
    Related Articles

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806