Uk banks reveal risks climate crisis pose to financial institutions

By Nneka Nwogwugwu

In a bid to join the global community fight climate change, banks in the UK have revealed the risks financial institutions will face as climate crisis increases.

The UK banks will reveal their exposure to the climate crisis and highlight the risks that rising temperatures and sea levels could pose for the financial system.

This is part of the Bank of England’s climate stress tests this year, the Guardian UK stated.

The stress tests will put 19 banks and insurers through three climate scenarios, according to an update released on Tuesday.

The central bank will be monitoring how those scenarios could affect potential loan losses, as customers default due to slowing growth and economic uncertainty.

However, the Bank of England will not identify individual businesses through the tests and will release only aggregate results for the banking and insurance sector, which will be published in May 2022.

Twelve insurers will also take part, marking the second time that the insurance sector has been tested for challenging climate risks.

The central bank also confirmed that the information will not be used to set capital requirements, instead, the exercise is meant to improve the way banks and insurers manage risks, and prompt a strategic review of their operations in light of the climate threat.

The Bank of England governor, Andrew Bailey, said the stress tests will help the regulator “size the risks from climate change for both the largest banks and insurers as well as the financial system as a whole”.