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PRA’s climate-risk expectations for UK banks and insurers: consultation without enforcement amid calls for mandatory rules and better disclosure

Published on: 06 May 2025

Published by an LexisNexis Financial Services expert
Legal News
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Article summary

Fresh guidance for UK banks and insurers, outlining what the central bank expects as they bolster preparedness for climate-related risks, arrived amid mounting criticism of the government’s own mitigation plans. The government’s advisory body, the Climate Change Committee, cautioned that adaptation efforts are either too slow, have stalled, or are heading the wrong way, while former prime minister Tony Blair urged a reset of climate policy in a report emphasising that adapting to climate change must move up the agenda. As both warnings were delivered on 30 April 2025, the BoE’s PRA guidance felt timely—yet it notably avoided any binding enforcement tools, prompting doubts about how much real-world effect it will achieve.

Expectations, not rules

In a 51-page communication, the PRA said it expects bank boards to be kept informed about climate-related risks. Boards should then set a business strategy that also addresses climate change and the transition. The PRA further expects banks and insurers to strengthen their evaluations of climate-related risks and improve their scenario...

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