Connect with us

Hi, what are you looking for?

Economy

Fed to include climate risk in bank oversight

SAN FRANCISCO — The US Federal Reserve is beginning to incorporate the impacts of global warming into its regulatory writ, following in the footsteps of its global peers, according to a paper published Monday by the San Francisco Fed.

In a pair of reports issued late last year, the US central bank signaled its intent to measure, analyze, and respond to climate-related risks as part of its oversight of individual banks as well as of the broader financial system.

The paper published Monday laid out the thinking behind the inclusion of climate-related risks in the two reports, one on supervision and regulation, and the other on financial stability.

That included a sharper understanding of the potential effect of climate hazards on bank-held assets, as well as the vulnerability of the overall financial system to abrupt shifts in asset prices if risk perceptions change suddenly.

“The effects of climate change are inescapable and include far-reaching economic and financial consequences for many households and businesses,” San Francisco Fed economist Glenn Rudebusch wrote in the regional Fed bank’s latest Economic Letter.

In response, he wrote, the Fed is moving to incorporate climate risk into both its microprudential and macroprudential oversight of banks, using tools that could include climate scenario analysis and climate stress tests to measure the banking system’s vulnerability to climate-related losses.

The Fed last year joined the Network of Central Banks and Supervisors for Greening the Financial System, after for many years staying on the sidelines as other central banks pushed to use their regulatory and research clout to deal with the effects of global warming.

Some US lawmakers, largely Republicans, have been critical of any moves by the Fed to impose climate-oriented regulations on banks, saying they could make it difficult for oil and gas companies to access capital, and warning that jobs and economic growth could suffer as a result. Meanwhile President Joseph R. Biden has made efforts to fight climate change a pillar of his new administration.

Mr. Rudebusch’s paper Monday made the case that the economic and financial fallout from climate change is already in train, in the form for instance of destructive storms and sea level rise eroding the value of coastal real estate, and of threats to the profitability of the energy sector as governments and businesses move to reduce carbon dioxide emissions.

“The bottom line is that every future scenario includes climate-related financial risk, though the level and form of the underlying uncertainty vary,” he wrote, adding that central banks, including the Fed, have made progress on identifying and managing those financial risks. — Reuters

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Economy

PHILIPPINE shares ended higher on Tuesday on data showing higher remittances from overseas Filipino workers (OFW) in March and continued bargain hunting. The benchmark...

Economy

THE PESO strengthened versus the greenback on Tuesday following strong remittance data. The local unit closed at P52.425 on Tuesday, appreciating by 6.8 centavos...

Economy

By John Victor D. Ordoñez A GROUP of taxpayers has asked the Supreme Court (SC) to stop the proclamation of Ferdinand R. Marcos, Jr.,...

Economy

SYDNEY — Philippine president-elect Ferdinand “Bongbong” R. Marcos, Jr. has made a low-key trip to Australia, the Age newspaper reported, bringing some protesters onto...

Economy

Philippine health authorities on Tuesday confirmed the local transmission of a more contagious Omicron subvariant that has become dominant in the US. “There’s local...

Economy

THE DEPARTMENT of Justice (DoJ) has dropped 29 cases from its list of extralegal killings and torture cases for lack of evidence, according to...

You May Also Like

Investing

Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...

Economy

Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Investing

Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...

Investing

As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...

Disclaimer: SmartRetirementReport.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.