The UK is set to carve out its own regulatory path on climate finance following the high-profile failure of a global banking coalition. The Net Zero Banking Alliance (NZBA) officially closed last month after being abandoned by its largest members, including HSBC, Barclays, and major US banks.
This collapse has pushed the responsibility for climate action firmly onto national regulators like the Bank of England’s PRA. David Bailey, a PRA executive, insisted that the UK’s momentum has not been lost, claiming bank engagement remains “vibrant.”
The PRA’s focus is on managing the direct financial risks of climate change. The regulator was a pioneer with its 2021 climate stress test, but it has since been criticised for failing to mandate that banks hold extra capital to protect against climate-related losses.
As Bailey steers through this issue, he is also managing a major domestic reform to help smaller banks compete, known as the “strong and simple” framework.
With the global, UN-backed approach now in tatters, the Bank of England must prove that its domestic regulatory strategy is strong enough to ensure the financial sector is prepared for the challenges of climate change.