Senators Urge Next Step on Climate Risk for Banks
Eleven Senators and I agree—bank regulators need to consider climate risk to protect your savings and bank health. To make it very clear to our financial regulators, a group of senators have sent a well-reasoned letter to our major financial regulators urging them to “issue supervisory guidance specifically addressing climate risk management as soon as practicable.” My sentiments exactly, as we wrote similarly in our own group letter to the same regulators a couple of months ago.
In a previous blog, we explained why this matters so much, with the top line being that if bank regulators and banks are not considering climate risk, our banks are at risk of major losses and even failure. Not acting would be like seeing the 2008 crisis coming and doing nothing to try avoiding it.
As the letter makes so many of the same points as me, I’ll simply quote their spot-on logic:
"Providing updated guidance would be an effective way to strengthen climate-related risk management using existing authorities. First, financial institutions would pay greater attention to climate risks before they are realized in a manner that could affect the safety and soundness of individual institutions. This is clearly a better alternative than scrambling to contain the damage after an institution suffers significant losses due to the physical impacts of climate change.
"Second, your agencies would gain greater visibility into climate-related risks across institutions. That can help examiners understand the most effective ways to manage risks and fill data gaps that make those risks difficult to analyze. Third, examiners’ expectations would become clear and transparent. That can improve the effectiveness of supervision and deter banks and credit unions from cutting corners when it comes to compliance. Finally, written guidance would allow the federal agencies to keep pace with state regulators and central banks in other countries that have already taken steps to clarify their own expectations for climate-related financial risk management."
Issuing supervisory guidance is a no brainer, one that the Office of the Comptroller of the Currency (OCC) and Acting Comptroller Hsu are leading on. As the Letter says, “Acting Comptroller Hsu has said that he intends to issue guidance for comment by the end of this year. We could not agree more with that approach.” Well said.
We look forward to the OCC’s supervisory guidance and other regulators following closely behind, so we all can be better protected from climate-related impacts to our financial system.