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LONDON, June 8 (Reuters) - The Bank of England on Tuesday
set out its first comprehensive stress test of the ability of
the British financial system to cope with climate change, saying
the results will not be used to determine capital requirements.
The test will scrutinise the resilience of the country's
biggest banks and insurers to stresses from the shift to a net
zero-carbon economy over coming decades as well as the impact of
extreme weather.
"The end result will be more robust management of climate
related financial risks across the sector," BoE Governor Andrew
Bailey said in a statement.
The results of the test are due to be published in May 2022.
The test is based on three scenarios that span 30 years:
early action by governments to deal with climate change, action
that is late, and taking no additional action.
Each scenario will be applied to two main risks: physical
such as fires and floods due to temperature changes, and risks
from transitioning to a more climate-friendly business that
could bring sudden changes in asset values.
"This is the first time we are testing both banks and
insurers to allow us to capture interactions between them and
understand the risks presented by climate change across the
financial system," the BoE said.
The exploratory exercise will not be used by the BoE to set
capital requirements, but will shape how regulators do their
work and help financial firms to model climate risks better.
(Reporting by Huw Jones
Editing by William Schomberg)
