WASHINGTON— Federal Reserve Chair Jerome Powell said whether banks lend to fossil fuel companies is “not a decision for bank regulators or any agency,” but he defended the central bank’s work to examine the risks that climate change could pose to the financial system.
“Our existing mandates are really prudential regulation of financial institutions,” he said during a press conference Wednesday after a meeting of the Federal Open Market Committee. “We expect them — and the public will expect us to expect them — to understand and be in a position to manage their risks.”
Powell said that while the central bank feels that it does have a role to play combatting the effects of climate change, policies on who banks should do business with are “decision[s] for elected representatives.”
“We're not the people who will decide the national strategy on climate change,” he said. “That has to be elected people and not so much us, but we feel like we have that narrow mandate, and we will do it well.”
The Fed's efforts to understand climate-related risk in the financial system could come under the microscope if Powell is re-nominated for another term as head of the central bank. His current term expires in February. On Tuesday, President Biden said he will announce his Fed board nominees "fairly quickly."
While progressives may prefer a more aggressive approach by the central bank on climate-related financial risks, Republican senators have taken a hard line in urging regulators to refrain from veering too far into environmental policy.
Powell's comments follow a
“Climate change poses significant challenges for the global economy and financial system, with implications for the structure of economic activity, the safety and soundness of financial institutions and the stability of the financial sector more broadly,” the Fed said in the statement.
The central bank said that while "the primary responsibility for addressing climate change itself rests with elected officials, the Federal Reserve is committed to working within our existing mandates and authorities to address the implications of climate change, particularly the regulation and supervision of financial institutions and the stability of the broader financial system."
The OCC also announced Wednesday that it
"I have prioritized the need to incorporate climate change into risk management frameworks to address the safety and soundness of the federal banking system," said acting Comptroller of the Currency Michael Hsu in a statement.
