Casten, Warren, Lawmakers Urge Financial Regulators to Stop Obstruction of Efforts to Tackle Climate-Related Financial Risks
Washington, D.C. – Representative Sean Casten (D-IL-06) and Senator Elizabeth Warren (D-Mass.) led a letter to the Federal Reserve Board (Fed), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), urging regulators to stop their obstruction of global financial regulators’ work to tackle climate-related financial risks. The lawmakers also called out the weaknesses revealed by the Fed’s 2023 “pilot scenario analysis” exploring six major banks’ resilience to climate-related financial risks.
20 lawmakers joined the letter.
House of Representative signers of this letter include: Earl Blumenauer (D-Ore.), Greg Casar (D-Texas), Sean Casten (D-Ill.), Adriano Espaillat (D-N.Y.), Jesus Garcia (D-Ill.), Raul Grijalva (D-Ariz.), Jared Huffman (D-Calif.), Barbara Lee (D-Calif.), Jerrold Nadler (D-N.Y.), Alexandria Ocasio-Cortez (D-N.Y.), Ilhan Omar (D-Minn.), Katie Porter (D-Calif.), Delia Ramirez (D-Ill.), Adam Schiff (D-Calif.), Rashida Tlaib (D-Mich.), and Juan Vargas (D-Calif.).
Senate signers of this letter include: Edward Markey (D-Mass.), Bernard Sanders (I-Vt.), Senator Elizabeth Warren (D-Mass.), and Sheldon Whitehouse (D-R.I.).
Nearly every global financial supervisor agrees that climate-related risks present safety and soundness risks to individual institutions and systemic risks to the financial sector.
Last month, the Fed released the results from its 2023 pilot Climate Scenario Analysis (CSA), a report meant to inform regulators and the public as to how the nation’s largest banks “are using climate scenario analysis to explore the resiliency of their business models to climate-related financial risks.” Yet, the Fed’s report revealed deep gaps in six large banks’ understanding of the risks posed to them from climate change, including Wells Fargo, Bank of America, and JP Morgan Chase. The banks struggled to properly model and assess climate risk, and some went as far as relying on third-party vendors to provide the relevant data and modeling to make crucial decisions. These findings cast serious doubt on the preparedness of the United States’ banks and financial system for climate-related financial risks.
Further, according to an April 2024 Bloomberg report, European financial regulators have been calling for lenders to “disclose their strategies for meeting green commitments,” only to be met with resistance by leaders at the FDIC, OCC, and Fed. Despite the significant impacts of climate change on insurance markets – leading some insurance companies to hike premiums or withdraw coverage from entire states or portions of states – U.S. regulators have done little to address the climate-related risks to the United States’ insurance system.
“Our lack of progress and innovation in establishing robust measures to address the financial and economic risks from climate change places us behind our international peers and is counterproductive to American interests,” wrote the lawmakers.
The lawmakers argued that regulating climate-related financial risks is well within the Fed, FDIC, and OCC’s authority and responsibilities.
“As we drag our feet on even recognizing and modeling the financial risk associated with climate change, our international partners are legions ahead,” the lawmakers continued.
The lawmakers requested an update on the regulators’ actions to combat climate-related risks and sought clarification on the regulators’ obstruction of the development of global financial rules by June 28, 2024.
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