Climate change must be kept “in proportion” with all other financial dangers, a top Bank of England regulator has said, while defending UK banks’ commitment to green goals. David Bailey, executive director at the PRA, made the comments amid the fallout from the collapse of a major global climate banking group.
The Net Zero Banking Alliance (NZBA) was forced to shut down last month after its largest members, including HSBC, Barclays, and several US banks, quit. This sparked concerns that the financial industry was backing away from its environmental commitments.
Bailey dismissed these worries, stating that banks’ engagement with the regulator on climate risk remains “vibrant.” He stressed that the PRA’s work on climate issues continues with the same momentum as in previous years.
However, he cautioned that climate is one of several major risks on the regulator’s agenda. “We can’t focus just on one risk,” he said, highlighting the boom in the unregulated private credit market as another area of significant concern.
The PRA is keeping the option of more climate stress tests open but has so far stopped short of introducing specific climate capital requirements—a move for which it has been criticised.