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June 22, 2022

Better Markets Welcomes Basel Committee’s Inclusion of Our Suggestions in Finalized Climate-Related Financial Risk Management Principles

WASHINGTON, D.C.—Phillip Basil, Director of Banking Policy, issued the following statement in connection with the Basel Committee on Banking Supervision’s finalization of its principles around the management of climate-related financial risks:

“The Basel Committee on Banking Supervision (the Committee) is responsible for setting international standards for banking institutions, and we welcomed the opportunity to comment on and then meet with and discuss with the staff its proposed principles regarding the management of climate-related financial risks.  The finalized principles, released on June 15, are largely similar to the proposed version, but two key additions that we advocated for were included to enhance supervisory expectations for climate risk management.

“This is very important because these principles will serve as the foundation for the incorporation of climate-related risks into banks’ risk management processes as well as in setting the expectations of the markets and public around those risks. Our first suggestion was to add the expectation that banks incorporate any public commitments related to the management of their climate-related exposures into their risk management processes.  This had been proposed by the Office of the Comptroller of the Currency in their principles and raised to the Committee’s attention in our comment letter.  The second suggestion was for the Committee to strengthen the language around scenario analysis expectations, particularly regarding banks’ design of climate scenarios.

“With the Committee principles as a minimum standard, the U.S. federal banking agencies now must work together quickly to put in place their own principles related to the management of climate-related risks. Such action is necessary to ensure these risks are appropriately addressed by U.S. banks to further a safe and sound banking system and overall financial stability to protect hardworking Americans as the risks from climate change evolve.”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.

 

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