The Bank of England’s regulatory arm is performing a delicate balancing act, weighing the “important” threat of climate change against other emerging financial dangers, according to one of its top executives.
David Bailey of the PRA affirmed the regulator’s commitment to climate action, stating that “momentum” in this area is being maintained. He left the door open to future climate stress tests, which check if banks can withstand financial shocks from global heating.
However, he also stressed that climate risk must be put “in proportion” with other threats. As an example, he pointed to the regulator’s efforts to understand the risks posed by the boom in private credit, a rapidly growing and unregulated corner of the financial world.
Bailey’s comments were made to downplay the recent collapse of the Net Zero Banking Alliance (NZBA). The global group, which was abandoned by members like Barclays and HSBC, shut down last month, raising fears of a retreat on climate goals.
Bailey insists this is not the case, arguing that UK banks’ engagement with the PRA on climate risk remains strong, even without the alliance.