Senate Democrats urge bank regulators to assess climate risks
WASHINGTON — Senate Democrats are calling on bank regulators to detail the steps they have taken to identify and manage climate-related risk to the U.S. financial system.
The 20 senators, led by Sen. Brian Schatz, D-Hawaii, a Banking Committee member, urged the three federal agencies to join their international peers in ensuring the financial system is resilient to climate-related risks.
“It is imperative that U.S. financial regulators ensure the stability of our financial system in the face of these risks,” they wrote in letters to Federal Reserve Board Chairman Jerome Powell, Comptroller of the Currency Joseph Otting and Federal Deposit Insurance Corp. Chair Jelena McWilliams.
The senators include Sen. Sherrod Brown, D-Ohio, the Banking Committee’s ranking member. “We urge you to assess the degree to which the U.S. financial system is prepared for climate change and begin incorporating climate-related risks into individual examinations and macro-prudential supervision of U.S. financial institutions,” they said.
The members noted that an international group of 18 central banks and bank supervisors have organized the Network for Greening the Financial System, which is working to develop best practices to incorporate climate risks in prudential supervision and financial stability surveillance. They also said the Bank of England recently announced it is planning to include the impact of climate change in its bank stress tests as early as next year.
“We have seen no evidence that your agencies have seriously considered the financial risks of climate change or incorporated those risks into your supervision of financial institutions,” the senators wrote. “Neither the Federal Reserve, the Office of the Comptroller of the Currency, nor the FDIC included any mention of climate change risks in their most current supervisory reports or risk assessments, despite the fact that 2018 saw record-breaking damage from weather and climate events and the publication of several high-profile reports on the impending impacts of climate change.”
The lawmakers are asking the regulators if their agencies have assessed the physical and transition risks to U.S. financial institutions resulting from climate change, systemic risks that climate change can pose, and whether the U.S. financial system is resilient to climate risks.
They are also asking the regulators if they have collaborated with regulators in other countries to discuss best practices for assessing and managing climate change risks, and if they have conducted research internally on the role of financial regulators in assessing climate risks.
The senators are asking the regulators to respond to their questions by Feb. 15.