The Bank of England (BoE) has announced a conference on adjusting the international capital framework to take account of climate-related financial risks, calling for papers on the use of prudential capital tools to mitigate those risks.
Scheduled for October, the objective of the conference is to “facilitate discussion on the complex issues associated with adjusting the capital framework to take account of climate-related financial risks”. The BoE is calling for an “internationally coordinated response.” and has said the debates will “inform the bank’s internal view” as it considers its own policy response.
Hosting a conference focusing on climate and capital was one of four next steps identified by the BoE in a recent report examining the role of capital requirements in climate-related financial risk management. Further research and analysis is promised during 2022, along with a follow-up report on the use of capital in addressing climate risk.
The BoE will also “explore the balance between an internationally driven Pillar 1 approach and a more domestic Pillar 2 approach”, and will publish a plan on how future scenario exercises might guide work on capital and climate-related risk requirements.
Discussions on climate and capital are currently underway at the International Association of Insurance Supervisors and the Basel Committee’s Task Force on Climate-related Financial Risks. The Basel Committee is currently holding a public consultation on principles for the effective management and supervision of climate-related financial risks. A draft document released as part of that consultation included the expectation that banks incorporate climate risks into their internal capital and liquidity adequacy assessment processes.
The European Central Bank is also examining climate-related capital requirements, and has published a theoretical model for explicitly incorporating climate risks into the capital framework for banks. However American financial regulators lag far behind their international peers, with Treasury Secretary Janet Yellen recently calling discussion of climate capital requirements in the US “premature”.
The BoE’s climate and capital conference will be held on 19 October 2022 and the deadline for paper submissions is 30 June 2022.
This page was last updated February 7, 2022
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