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Bank of England urges banks to quantify climate risks properly

Published: 11:50 12 Jan 2022 GMT

Bank of England -

The Bank of England has told banks in Britain to properly quantify risks from climate change or face regulatory intervention if they fall short.

In a letter to bank CEOs, the BoE said banks should look carefully at how they incorporate climate-related risks into business strategies, decision-making and risk-taking.

"Furthermore, we will keep a range of supervisory tools under review for use where we deem progress to be insufficient," the letter said.

It 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.

The central bank told insurers in a separate letter that they should conduct further research into the potential impact of litigation risk related to climate change, and on the impact of physical risks on assets and liabilities.

"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.

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