U.S. regulator joins effort to press banks to gauge climate-linked financial risks
By Pete Schroeder
WASHINGTON (Reuters) – A second U.S. banking regulator has laid out the way it thinks banks ought to guard themselves in opposition to dangers emanating from local weather change.
On Wednesday, the U.S. Federal Deposit Insurance coverage Company (FDIC) revealed draft ideas that may direct financial institution boards and senior administration to develop strong frameworks to measure and guard in opposition to climate-related monetary threat.
The proposal, which mirrors one revealed in December by one other financial institution regulator, the Workplace of the Comptroller of the Foreign money, is the newest instance of U.S. policymakers working to construct defend the U.S. monetary system from the impacts of local weather change.
The potential results of local weather change – rising sea ranges, worsening floods and fires, and authorities insurance policies transitioning away from carbon-heavy business – might destroy trillions of {dollars} of property across the globe.
“These climate-related monetary dangers pose a transparent and important threat to the U.S. monetary system and, if improperly assessed and managed, could pose a menace to protected and sound banking and monetary stability,” mentioned performing FDIC Chairman Martin Gruenberg in a press release.
Just like the OCC draft, the FDIC’s ideas envision a sweeping plan by banks to include climate-related threat administration into each a part of their enterprise.
In the meantime, the Federal Reserve is constructing out its personal “state of affairs evaluation” to measure potential climate-related losses at giant banks. Reuters beforehand reported giant banks count on such government-run evaluation might start as quickly as 2023.
(Reporting by Pete Schroeder; modifying by John Stonestreet)
