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Regulatory Briefing: Bank of England publishes green stress test results

By Victor Smart

The Bank of England’s much-anticipated climate change stress test exercise has revealed that UK banks and insurers would take a big, but manageable, hit from a failure to handle risks from global warming.  Results from the so-called Climate Biennial Exploratory Scenario (CBES) estimate that, under a worst-case scenario, banks could incur up to £225bn in credit losses by 2050 and the asset value of insurers could drop 15 per cent.

At this scale of losses sustained over the coming 30 years, climate change would not pose a threat to institutions’ solvency, says the BoE, which conducted the tests last year. But overall, much still needs to be done.

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