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Recent Editions
Risk Channel
North America
Citigroup has conducted a confidential analysis that reveals potential loan losses of billions of dollars if efforts to combat climate change accelerate. The analysis, prepared by the bank, shows that if the world were to achieve net-zero greenhouse gas emissions by 2050, Citigroup could suffer $10.3bn in loan losses over 10 years. The losses would primarily impact borrowers in the oil, gas, and real estate sectors. While the estimated hit to Citigroup's loan book is relatively small compared to its $730bn wholesale loan book, it highlights the challenges faced by banks in managing their loan book exposure amid the transition away from fossil fuels. The analysis also found that severe hurricanes could trigger losses to Citigroup's loan portfolio, although the impact would be limited. The Federal Reserve has yet to publish aggregated findings on the climate exposure of major U.S. banks. Citigroup's analysis is based on assumptions and uncertainties, and achieving the net-zero target by 2050 would require significant policy changes.
Full IssueRisk Channel
UK/Europe
The CEO of the Financial Conduct Authority (FCA) has been summoned to appear in front of a House of Lords committee as a row over the regulator’s plans to “name and shame” financial services firms under investigation spirals. Nikhil Rathi has defended the plans, arguing that being more transparent about probes will serve as a deterrent. The City roundly condemned the move and the Chancellor also stepped in and urged the FCA to rethink its plans. Now, the Lords' Financial Services Regulation Committee has launched its own inquiry after Rathi failed to respond to a request to pause the implementation of the plans until after peers had properly scrutinised the proposal. Lord Forsyth of Drumlean, chair of the committee, said: “This isn't acceptable.” Meanwhile, a senior lawyer has made a rare call for the government to intervene and overrule the regulator. “This is but the tip of the iceberg,” said Harvey Knight, UK head of the financial services regulatory group at Withers. The FCA is “exceeding its statutory objectives in pursuit of what it considers to be its best interests without any balancing considerations,” he added. Finally, the Labour party said the FCA should listen to the City and ensure “an appropriate balance between enhancing the integrity of the sector while protecting the international competitiveness of the UK.”
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