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Bank management

Federal Reserve Withdraws Climate-Related Financial Risk Management Principles Amid Criticism

Strategic Insights

— 2 min read

The Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and Federal Reserve have withdrawn the interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions. This move comes after Federal Reserve Chair Powell acknowledged the risks climate change poses to the financial system, stating that in 10-15 years, there may be regions where banks can't get a mortgage, ATMs won't be available, and branches won't be present. The withdrawal has been met with criticism from Public Citizen's Climate Program, which argues that effective bank regulation requires addressing climate risks before they have destabilizing effects.

Key Takeaways:

  • The FDIC, OCC, and Federal Reserve announced the withdrawal of the interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions, a framework for supervising climate-related financial risks.
  • The principles required banks with over $100 billion in assets to consider climate-related financial risks in business strategy, risk management, and strategic planning.
  • Federal Reserve Chair Powell acknowledged the risks climate change poses to the financial system, stating that in 10-15 years, there may be regions where banks can't get a mortgage, ATMs won't be available, and branches won't be present.
  • The withdrawal has been met with criticism from Public Citizen's Climate Program, which argues that effective bank regulation requires addressing climate risks before they have destabilizing effects.
  • The move has been described as an "irresponsible and politically motivated" decision, with Public Citizen's Climate Program stating that the Federal Reserve has done the "bare minimum" on climate and will do even less, putting the banks it supervises and the broader financial system at risk.
  • Elyse Schupak, policy advocate with Public Citizen's Climate Program, expressed concern that the withdrawal of the principles will lead to the capitulation of the Federal Reserve to climate denial, threatening both its legitimacy and efficacy.

Statistics:

  • $100 billion: the minimum assets required for banks to consider climate-related financial risks under the withdrawn principles.
  • 10-15 years: the timeframe given by Federal Reserve Chair Powell for when climate change may lead to unavailability of mortgages, ATMs, and bank branches in certain regions.
  • 2022: the year in which Public Citizen's Climate Program released the statement criticizing the Federal Reserve's withdrawal of the climate-related financial risk management principles.

Sources:

  • Public Citizen: The initial announcement of the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and Federal Reserve withdrawing the interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions.
  • Public Citizen's Climate Program: The statement issued by Elyse Schupak, policy advocate, criticizing the Federal Reserve's withdrawal of the climate-related financial risk management principles.
  • Federal Reserve: The acknowledgement from Federal Reserve Chair Powell of the risks climate change poses to the financial system.

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