Few have implemented integrated policies, key indicators and metrics, mitigation strategies, detailed monitoring, and risk appetite statements. We recognise that there are some areas where the science, data or tools are not yet sufficient to estimate risks accurately. But in these cases firms can and should explore the use of reasonable proxies and assumptions to work around these issues, rather than leaving risks unrecognised. Imperfection is not an excuse for inaction. Supervisory expectations and working with industry We set out our supervisory expectations of firms’ approach to managing the financial risks from climate change in April 2019, covering governance, risk management, scenario analysis, and disclosure.13  At the time we said we would follow up with further guidance to industry. And today we are publishing that guidance in the form of a Dear CEO letter.14 In which we are being clear that we expect firms to have fully implemented these supervisory expectations by the end of 2021. As I said earlier, addressing the risks and opportunities from climate change in the financial sector is a shared and unprecedented challenge, for which we do not yet have a comprehensive how-to-do-it manual. To help address that, in March 2019, the PRA and FCA established and co-chaired the Climate Financial Risk Forum (CFRF) to work with industry to build expertise and share best practice on managing climate-related financial risks.15  The Forum brings together banks, insurers, asset managers, and other key stakeholders to consider challenges around climate disclosure, scenario analysis, risk management, and innovation in the interest of consumers.
This is something on which individual banks will have to take a view, but I would like to offer some general advice. First, banks should accept that profits for 2003 may not reach budgetted targets as a result of the outbreak; and they should not strain too much to make up the difference. When profitability comes under pressure, it is important to avoid the mistakes that might arise from over-aggressive business tactics. Keep the bank healthy from a capital and liquidity point of view in order to benefit from the business recovery when it comes, as it surely will. Banks should also monitor closely the financial position of their customers and adopt a supportive attitude to those experiencing financial difficulties as a result of the SARS outbreak. This means being prepared to offer temporary relief arrangements to borrowers who find that they cannot service their debts in the current environment. This should not be seen as soft option for customers since the banks will certainly not benefit if those customers go bankrupt. Nor do I suggest that relief should be offered indiscriminately. The long-term viability of the customer or his business, his track record and his willingness to cooperate with the bank are all factors to be taken into account in deciding whether to restructure debts. Each case thus needs to be looked at on its merits.