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Federal Reserve Board expects climate change guidance to come to big banks

The Federal Reserve Board of Governors, Lael Brainard, will speak at the National Association for Business Economics (NABE) Annual Meeting on Monday, September 27, 2021 in Arlington, Virginia.

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The Federal Reserve Board needs to take steps to assess the exposure of major banks to climate change-related financial risks, Federal Reserve Board Governor Lael Brainard said Thursday. ..

Brainard said the Fed, which oversees the country’s largest bank, is developing a scenario analysis tool to model the economic risks of climate change and assess the resilience of the financial system as a whole. She also suggested that the Fed would provide supervisory guidance on climate change and help banks mitigate their exposure.

The damage caused by storms, floods, droughts and wildfires is one of the dangers of climate change that can cause massive losses and harm the economy.

“We look forward to providing supervisory guidance to large banks in their efforts to properly measure, monitor and manage significant climate-related risks, led by many other countries,” Brenard said. Says. Said in a virtual speech For the Federal Reserve Bank of Boston research conference.

The move to develop climate scenarios and provide guidance to banks will bring the Fed more in line with what other major central banks, such as the European Central Bank and the Bank of England, are doing. ..

The Federal Reserve Board has begun to take A more active role in climate changeFocusing on this issue, it involves the establishment of two internal committees to join the global network for greening the financial system.

Brainard also said that Federal Reserve Board Chairman Jerome Powell, whose term expires on February 5, 2022, is a progressive Democrat who criticizes him for issues such as financial regulation and climate change. It comes from facing increasing resistance to potential recommendations by the Fed.

Powell said earlier this year that the Fed is likely to require banks to carry out their own tests to assess their vulnerability to climate change.He also maintains that climate change Not the main consideration For the central bank in formulating monetary policy.

Brainard said regulators are facing “substantial work” in addressing data gaps in assessing banks’ climate-related risks. Scenario analysis can also focus on how financial institutions can insure and hedge against climate-related risks, she said.

“Reinsurance agreements and investor agreements can transfer risk throughout the financial system, but some risk is likely to remain,” she said. “Climate-related risks can accumulate in hidden ways that can lead to chain losses.”

Federal Reserve Board expects climate change guidance to come to big banks

Source link Federal Reserve Board expects climate change guidance to come to big banks

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