Banks’ loan-loss forecasts diverge in BoE climate exercise

Dispersion of estimates for corporate impairments highlights variety of assumptions for modelling climate risk

UK lenders participating in the Bank of England’s (BoE) latest climate risk simulation forecast wildly divergent loan-loss trajectories in a transition to net-zero, highlighting how modelling remains in its infancy despite the urgency to decarbonise balance sheets.

As part of its second Climate Biennial Exploratory Scenario, the UK regulator asked seven lenders to estimate how much corporate credit impairment rates would increase as policies to contain global warming are pushed through, under

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