Regulator considers new rules to make banks assess climate risks
THE Bank of England could force board-level bank bosses to manage climate change risks as part of new rules being floated by its regulatory arm.
The Bank’s supervisory Prudential Regulation Authority (PRA) has launched a consultation paper outlining how UK insurers, banks, building societies and investment firms must be more hands-on in evaluating the costs of environmental change.
It includes requirements for scenario planning and financial risk disclosures as well as corporate governance, stressing that there should be “clear boardlevel engagement” on climate change risk-planning.
“The PRA would also expect that the board and its subcommittees have clear responsibilities for managing the financial risks from climate change, including individual responsibilities for the relevant existing senior management function,” the regulator said.
The proposals aim to force financial firms to craft business strategies which would manage “far-reaching and foreseeable risks” of climate change.
The consultation paper comes just weeks after the Bank warned that only one in 10 banks is adequately prepared for climate change.
“Climate change and society’s response to it presents financial risks that are relevant to the PRA’s objectives of safety and soundness,” the PRA said yesterday. “Whilst these risks may crystallise in full over longer-time horizons, they are becoming apparent now.
“Firms are enhancing their approaches to managing these risks, but more need to take a forward-looking, strategic approach if financial risks are to be minimised.”