Disclosure metrics force us to confront the question of where we are and where we want to be, and thereby drive different decisions today. Knowing that we will be publishing our next TCFD disclosure in less than 12 months creates discipline and urgency. That brings me to the management of climate risks. Last year we became the first central bank and supervisor to set out supervisory expectations for banks and insurers on the management of climate risks.2 And this year we wrote to CEOs with more guidance, putting in place a deadline for firms to meet our expectations by the end of 2021.3 Of course, this is no easy task. That is why we have worked closely with industry through the Climate Financial Risk Forum (CFRF) to publish a practical guide for firms so that they can implement changes.4  1  https://www.bankofengland.co.uk/prudential-regulation/publication/2020/climate-related-financial-disclosure-2019-20 https://www.bankofengland.co.uk/prudential-regulation/publication/2019/enhancing-banks-and-insurers-approaches-to-managing-thefinancial-risks-from-climate-change-ss 3 https://www.bankofengland.co.uk/prudential-regulation/letter/2020/managing-the-financial-risks-from-climate-change 4 https://www.fca.org.uk/transparency/climate-financial-risk-forum 2  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  As a central bank we are not only concerned with resilience at a micro-level, but also at a macro-level. That is why in July 2019 we announced our plan to launch a climate stress test exercise.5 When the pandemic hit, we decided to postpone the exercise in light of strain on firms’ resources, and to ensure the ambitious scope of the exercise could be maintained. We have used the extra time to continue our work on the design of the exercise, and firms have been busy preparing for it.

Results of the comprehensive asset-assessment exercise As you probably all know, the European bank assessment exercise, covering 130 banks, most of which will be directly overseen by the SSM, essentially comprised two components. First, an asset quality review (the AQR), which basically involved an analysis of the rigour with which bank balance sheets reflect the value of different assets. The review evaluated, as appropriate, accounting classifications, collateral values, fair value calculation methods and the recognition of borrowers’ impaired creditworthiness. Second, a stress test, evaluating how solvency would fare in two macroeconomic scenarios: a baseline scenario, considered likely, and another highly adverse scenario. BIS central bankers’ speeches  1  In addition to increasing the transparency of banks’ financial position and to providing information to help ensure the effective functioning of the SSM as a supervisory authority from the outset, the analysis aimed to detect potential capital shortfalls that needed to be rapidly redressed. To do this, quantitative benchmarks were set for capital adequacy ratios – measured by the ratio of common equity tier 1 (CET1) capital to risk-weighted assets – for each part of the exercise (8% in the AQR and in the baseline scenario of the stress test, and 5.5% for the adverse scenario). The exercise was designed to high standards. This was manifest in the breadth of the field work done for the review of bank balance sheets, in the severity of the adverse macroeconomic scenario envisaged and in the wide range of risk (credit, market, sovereign, etc.) factors considered.