The chair of the Federal Reserve, Jerome Powell, is facing criticism for his role in blocking efforts to incorporate climate risk in global financial rules. European central bankers have been advocating for lenders to disclose their strategies for meeting green commitments, but US regulators, led by the Fed, have opposed these measures, citing their narrow mandate and concerns that the Basel Committee on Banking Supervision was overstepping its purpose. Powell stated that policies to address climate change are the responsibility of elected officials and agencies charged with this task, and the Fed has not received such a charge. The Federal Reserve has blocked a proposal to make climate risk a focus of financial rules, which would have required banks to disclose their strategies for meeting green commitments. Critics argue that Powell's stance ignores climate-related financial risk and threatens a global regulatory response to the ongoing crisis. US Senator Elizabeth Warren and Representative Ayanna Pressley have previously called for the Federal Reserve to address climate-related financial risks. [9eaee94c]
Federal Reserve Vice Chair of Supervision, Barr, stated that the Fed will take a 'thoughtful approach' to the proposed rule for the Basel III endgame requirements for bank capital. He did not mention whether the Fed would issue a re-proposal but stated that changes will be made along the way. The Fed expects to receive a lot of comments on the rule. Barr also mentioned that the Fed's role in climate change risks is to ensure financial stability and that banks are assessing and managing their risk related to climate change. He highlighted concerns about the office commercial real estate sector and operational risks, particularly cybersecurity. Overall, Barr stated that the banking system is sound and resilient. [a3c066d3]
The US Federal Reserve conducted a pilot climate scenario analysis exercise with six big banks, including Bank of America Corporation, Citigroup Inc, The Goldman Sachs Group, Inc, JPMorgan Chase & Co, Morgan Stanley, and Wells Fargo & Company. The exercise aimed to assess the banks' climate risk-management practices and challenges. The results revealed a high degree of uncertainty and significant data gaps that make it difficult for the banks to properly manage climate-related risks. The analysis focused on estimating the impact of physical and transition risks on loan portfolios over different time horizons. As a result of the exercise, the banks plan to invest in data, models, and expertise to better identify, estimate, and monitor climate-related financial risks in the future. [a7bc9322]
Anne Perrault, senior climate finance policy counsel, warned that millions of consumers, communities, and financial institutions are at the brink of a financial disaster due to climate change. US Treasury Secretary Janet Yellen has also expressed concern about climate change as an existential threat. Powell has framed the issue as a partisan political fight and stated that the Federal Reserve does not want to get involved in these debates. [9eaee94c]