WASHINGTON, D.C.—Dennis Kelleher, President, CEO, and Co-founder, issued the following statement in response to the Board of Governors of the Federal Reserve System (Fed), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency’s (OCC) (collectively the “Banking Agencies”) decision to rescind interagency principles related to large banks’ management of climate-related financial risks.
“The Banking Agencies are supposed to act based on facts, data, and analysis, not partisan or political winds, and certainly not campaign contributions. However, today they have taken another step in enacting the Trump administration’s political agenda that mirror’s the agenda of one of its largest campaign contributors, the fossil fuel industry’s mindless anti-science, anti-risk, anti-climate agenda. Adding insult to injury, as addressed below, one of the Fed’s Governors who is vying for the Chairmanship somehow thought these serious matters were a fit occasion for a snarky comment. While that sadly might ingratiate him with some, such flippancy is far beneath what used to be the dignity of the office and would have been a disqualification in even the recent past.
“The Banking Agencies are supposed to focus on their mission to identify and ensure mitigation of all risks regardless of source, origin, or ideology. Politicizing and undermining the safety, soundness, and stability of the banking system and the economy by picking and choosing only some risks does not make the risks go away. On the contrary, it ensures that those risks will increase and spread, almost certainly exploding in the future when banks and policymakers are unprepared and forced to undertake much more drastic actions than would have otherwise been required. This is not just regulators putting their head in the sand and ignorantly denying reality; it is an affirmative dereliction of duty and violation of their mandates to protect the banking system, the economy, and all Americans from all financial risks.
“It’s not supposed to matter to regulators if risks come from banks’ activities (credit, market, liquidity, operational, or compliance risks), from negligence, incompetence, or recklessness, or from external threats like criminals, cyber, crypto, or climate. Regardless of origin, any material risk to the safety, soundness, and stability of banks must be analyzed, addressed and mitigated. But regulators are now excluding financial risks from climate for political reasons and that is a grave threat to the banking system and the American people, who are going to needlessly suffer the consequences in the future.
“To make matters worse, the Fed’s recent climate scenario analysis proved that there is a dangerous gap in the management of financial risks from climate at the largest banks in the country. The scenario analysis showed that six of the largest banks in the country—which should be best able to measure, monitor, and manage their risks—had significant data and modeling deficiencies when attempting to simply estimate their climate risk for an ‘exploratory’ test. Moreover, most of the banks were forced to rely on third parties because they their own systems did not have the information needed for the analysis, including very basic real estate exposures and insurance information. This directly contradicts the Banking Agencies’ claim today that the principles are not necessary.
“Ironically, today’s announcement directly conflicts with warnings from the Wall Street banks themselves about catastrophic climate risk.
“Finally, Fed Governor Waller’s sarcastic, two word ‘statement’ is so beneath what is supposed to be the dignity of the office that it is hard to believe that anyone in a responsible position such as a Governor of the Fed would utter them. These are gravely serious matters, not merely industry talking points and slogans or occasions to score cheap political points. This is a sad day for reputation and integrity of the Fed and what used to be the seriousness with which it undertook its role in the past.”
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