Leading figures from the finance sector and civil society have called for the Bank of England (BoE) to apply additional capital requirements against banks’ and insurers’ support for fossil fuel projects, ahead of a landmark conference.
Beginning today, a two-day meeting hosted by the BoE and Prudential Regulation Authority (PRA) will consider issues associated with adjusting the UK’s capital framework to take greater account of climate-related financial risks.
A letter to governor Andrew Bailey and deputy governor Sam Woods, coordinated by the New Economics Foundation, calls on the BoE to introduce higher risk weights on assets linked with new fossil fuel production in line with a one-for-one rule, where each pound of financing for such activities must be matched with one pound of a lender’s own funds.
It also urges the bank to gradually adjust capital requirements on exposure to existing fossil fuel assets in line with the ‘higher risk’ weighting under the Basel Framework.
The letter says such measures are necessary to “break the finance-climate ‘doom loop’”, in which financial activities continue to fuel the climate crisis and in turn increase risks to the financial system. Among the 40 signatories are Bevis Watts, the CEO of Triodos Bank UK, and Bill McKibben, the founder of 350.org.
Sam Woods has this morning given a welcome address to the conference, which will also feature a keynote speech on Thursday by Ravi Menon, chair of the Network for Greening the Financial System and managing director of the Monetary Authority of Singapore.
Discussions will focus on the appropriate time horizon over which climate risks should be reflected in capital requirements, and whether requirements should be set on a microprudential firm-specific basis or applied at a macroprudential system-wide level.
This page was last updated October 20, 2022
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