Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, released the following statement in response to the Office of the Comptroller of the Currency’s (OCC) releasing principles on climate-related financial risk, and the Financial Stability Oversight Council (FSOC) establishing a Climate-related Financial Risk Committee within FSOC:
“Last year, I called on President-Elect Biden to ensure that financial regulatory agencies prioritized climate change to help us address this existential threat. So, I am pleased that Acting Comptroller Michael Hsu and the OCC have started acting on this threat by initiating a process for climate risk supervision. If finalized, the guidance that these principles are aimed at producing would be historic, representing the first time that a federal banking regulator in the United States acted to require financial institutions to measure and manage climate risk. Importantly, the OCC’s principles expect bank management to prepare a scenario analysis, which can be a useful tool in understanding and mitigating climate risk. The OCC also expects bank management to understand a broad range of climate-related financial risks, including interest rate risk. This is especially critical in light of recent financial stability warnings about re-pricing of risky carbon intensive assets, including distressed oil and gas companies, in the event of a tighter monetary policy environment. Acting Comptroller Hsu’s actions follow commitments from President Biden, Treasury Secretary Yellen, and the FSOC that regulators will address climate change as a threat to the safety and stability of our financial system. The establishment of the Climate-related Financial Risk Committee within the FSOC, which I also recommended to President-elect Biden last year, is another welcome measure.
"These actions are just initial steps, and important work remains in perfecting the data and tools that inform climate risk supervision. But as the October FSOC report made clear, imperfect data and tools must not be an excuse for inaction. The FSOC report also recommended all Council members and their agencies take action to guard against climate risk, and so I urge the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and National Credit Union Administration (NCUA) to follow the OCC’s lead and provide details around how they will ensure financial institutions manage their exposure to climate risk. In addition, the FDIC and NCUA should join the Fed and OCC in becoming a part of the Network for Greening the Financial System. The threats that climate change poses to our financial system are enormous, and so I applaud the OCC for demonstrating leadership.”