Integrating climate risk into the prudential capital framework

UK Finance worked with banks that had taken part in the Bank of England’s climate change stress test, as well as associate member KPMG, to produce a report on ‘Integrating climate risk into the prudential capital framework’.

It supports the view that any changes to the capital framework should be made to mitigate climate related financial risks. The report concludes that in the short to medium term existing Pillar 2 regulatory tools, including stress testing, can capture these risks but in the longer term evidence-based changes to Pillar 1 may be appropriate