UK Finance’s latest must–read blogs
UK Finance
The collective voice for the banking and finance industry, representing around 300 firms.
Maximising resilience - The importance of the FSB Climate Vulnerability Framework?
The world is warming up.?
According to the World Meteorological Organization, the January-September 2024 global temperature was 1.55oC above the 1850-1900 average and 2015-2024 were the warmest ten years on record.?
As well as their impact on the individuals affected, significant weather events related to global warming bring substantial financial impact too. The Southern Californian Wildfires earlier this year, for example, resulted in over 16,000 structures being destroyed. Insurers estimated insured losses of between $28bn and $75bn, with total economic damage potentially reaching $275 billion, making it the most costly disaster in US history.?
The impact of these disasters is far-reaching, and the financial sector is certainly not immune. Financial organisations can suffer direct impacts, such as when weather events damage assets. They can also suffer more indirect impact, for example, moving to a low-carbon economy can cause risks such as policy changes (for instance, a reduction of subsidies for green investments could result in stranded green assets).??
Since financial organisations touch so many aspects of life, there is a wide-reaching ripple effect to the impact of climate change as the sector is impacted by the organisations it interacts with.?
The Financial Stability Board (FSB) recently published its Climate Vulnerability Framework which offers a framework and analytical toolkit to assess the build-up of climate-related vulnerabilities and examines how climate risks could impact the global financial system.?
Read the full blog co-written by Davies - Consulting Division's Banking and Markets Senior Partners Michael Lutterodt and Silvia Amoros, and Insurance Partners David J. McNamara and Robert Brack.
?
The future of verification: Rethinking financial security?
Is traditional background screening fit for purpose??
Financial institutions face an ever-evolving challenge in detecting fraud and financial crime. Despite rigorous screening protocols, it is estimated that between 70-80 per cent of global crime remains undetected. Conventional verification methods rely almost entirely on historical records – if an individual has never been convicted, flagged, or officially documented, they may pass scrutiny without further investigation. Yet, real-world risks often extend far beyond what is formally recorded.?
The financial sector increasingly recognises the limitations of traditional checks and the potential consequences of relying on outdated methodologies. But what if risk could be assessed in a way that moves beyond reliance on static records??
The limitations of conventional verification?
Most background checks follow a well-established pattern:?
Yet, financial crime networks do not operate within the constraints of historical records. Those involved in money laundering, cyber fraud, illicit financial flows, and other forms of financial crime often avoid detection through sophisticated methods, leaving no direct trace in conventional databases. Similarly, connections to wider networks of criminality, which might serve as early warning indicators, are frequently missed.
Read the full blog by Mark Huson, Partner, Financial Services, EKIM Consulting.?
?
Balancing regulatory obligations with the growth agenda?
Whilst there has always been a need for banks to manage regulatory requirements alongside growth ambitions, it has never been as stark as in the current environment.?
The government is keen for regulators to strike the right balance, which subsequently gives the banks the opportunity to use regulation as a “smart” means for business planning, including to support growth ambitions.?
With?SS9/17?(Recovery Planning effective from 3 March 2025) and?PS5/24?(Solvent Exit Planning for non-systemic banks and building societies effective from 1 October 2025), a lot of work is going into compliance with these policy statements. How do banks optimise business value from this business change??
The crux of the question posed by the statements revolve around what actions the banks would take in particular stress scenarios and the impact of those actions on the health, and strength of that bank. Systemic banks are considering Resolvability Assessment Framework, Trading Wind Down, Operational Continuity In Resolution and other resolution options whilst non-systemically important banks need to consider solvent wind down plans.
The models used could, and perhaps should, also be used to scenario-plan from a business perspective and not solely from a regulatory compliance point of view.