Bank of England studies climate buffers for banks

"We will provide an update on our approach in 2022 following a call for further research and a conference on climate change and capital requirements." The BoE said in 2019 that banks and insurers should set out by the end of 2021 how they manage risks from climate change and disclose them.

The Bank of England said on Thursday it will study whether banks and insurers need to hold capital specifically to cover their exposures to climate change - and crack the whip if there is too little progress in managing environmental risks.

"This work will help determine whether changes to the design, use or calibration of the regulatory capital framework may also be needed to ensure resilience against these risks," the BoE's Prudential Regulation Authority said in a statement. "We will provide an update on our approach in 2022 following a call for further research and a conference on climate change and capital requirements."

The BoE said in 2019 that banks and insurers should set out by the end of 2021 how they manage risks from climate change and disclose them. The Bank said in a report on Thursday that the firms it regulates have made "tangible progress" in meeting these expectations, but some are materially more advanced than others, and signalled a shift in gears in how it supervises this.

"As we move into 2022, the PRA will actively supervise to ensure firms meet expectations, with firms needing to demonstrate a good understanding and management of climate-related financial risks on an ongoing basis," it said. "In the report we highlight that we will consider the use of our full supervisory and regulatory toolkit to provide the necessary assurance or remediation where appropriate."

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