MNI BRIEF: BOE Launches Climate Change 'Stress Test'

The Bank of England Tuesday launched an 'exploratory scenario' as it looks to 'size up' the risks to the largest banks, insurance companies and the wider financial system. The review will use three differing levels of action to examine 'transition risk' and 'physical risk', the BOE said, allowing policymakers the chance to capture interactions between banks and insurance companies, helping understand the risks presented by climate change across the financial system.

"It's a novel exercise as firms will have to engage closely with their counterparties in order to get detailed data on those counterparties' exposures to these risks," BOE Governor Andrew Bailey said.