UK could face ‘banking crisis worse than 2008’ if City fails to prepare for fossil fuel collapse

(The Guardian, 12 Jan 2023) Report from climate activist groups says City is unprepared for potential collapse in value of fossil fuel assets.

The UK could suffer 500,000 job losses and be forced to spend £674bn of taxpayer cash to rescue its banks, unless the City prepares for the value of fossil fuels to collapse as a result of climate crisis regulations, research shows.

The report, published by a collective of climate activist groups known as the One to One campaign, suggests those financial repercussions could eclipse those linked to the 2008 banking crisis, which forced the government to bail out major lenders including Royal Bank of Scotland and Lloyds BankingGroup, and cost the UK roughly £560bn.

It illustrates the risks that are likely to emerge if banks and insurers fail to hold enough capital to cover the potential losses they are likely to face as a result of climate regulations meant to achieve net zero emissions targets over the coming years.

Those prospective regulations will probably make it harder for carbon-intensive companies to sell their products like oil and gas to customers, so they will instead be forced to buy greener sources of energy. This will reduce the value of carbon-heavy assets including shares or loans for fossil fuel projects or their related companies, which will in turn harm the institutional investors like bank, insurers and fund managers that hold them.

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The Guardian, 12 Jan 2023: UK could face ‘banking crisis worse than 2008’ if City fails to prepare for fossil fuel collapse

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