A climate risk consultant advises an Eastern European central bank. In response to regulatory changes, the bank will incorporate climate-related risks into bank policies. The consultant writes a summary on how central banks incorporated climate-related risks into policies. The summary highlights the Bank of England (BoE) example to demonstrate how the BoE integrated climate-related risks within the bank supervisory scope.
Which of the following BoE practices will the consultant recommend?
The Bank of England requires banks and insurers to include all material exposures related to financial risks from climate change in their capital adequacy and solvency assessments. This practice ensures that financial institutions are adequately accounting for the impact of climate-related risks on their financial health.
B has a misleading definition of "bottom up" to my opinion. So I choose C
CASE STUDY: BANK OF ENGLAND
The correct answer is D. Pages 89 and 90 of the book. Supervisors expected companies for using NGFS best practices and adopt them.
Microprudential Measures : Regarding governance, the BoE requires firms to allocate responsibility for climate-related risks to a designated executive under UK rules that allow senior executives to be held responsible.
Should be C, “ On risk management, the BoE requires banks and insur-ers, under their own capital adequacy and solvency assessments, to include “all material exposures” relat-ing to the financial risks from climate change.”