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Bank of England Issues Updated Assessment of Climate-Related Risks and Regulatory Capital Requirements for Financial Institutions
March 28. 2023The Bank of England released a report titled Climate-Related Risks and the Regulatory Capital Framework (Report) on March 13, 2023. The Report expands on the Bank’s 2021 Climate Change Adaptation Report (CCAR), in which it articulated initial views on existing regulatory capital frameworks for banks and insurers in relation to climate change. The CCAR concluded that the frameworks already in place, such as then-existing capital models and credit ratings, captured climate-related risks “to some extent.” The Bank’s updated assessment as set forth in the Report adopts a more cautious tone, concluding that the risk assessment “may be incomplete due to the difficulties in estimating climate risks (capability gaps) and there may be challenges in capturing risks in the existing capital regimes (regime gaps)."
