WASHINGTON, D.C.—Phillip Basil, Director of Banking Policy at Better Markets, issued the following statement on the Federal Reserve’s announcement of a “pilot” climate scenario analysis exercise for 2023:

“The Federal Reserve’s official announcement of its plan to conduct climate scenario analysis for the nation’s six largest, most complex, most dangerous financial institutions is a welcome first step in addressing the urgent need to mitigate climate related financial risks. To date the Fed has woefully lagged behind many of its European counterparts in conducting climate scenario analysis, which is key to identifying, sizing, and assessing the risks that climate change poses to the financial system.

“While it is encouraging that the program will begin ‘early’ next year, the overall process must be accelerated to ensure that the banking supervisors and the American public understand the risks at the largest, too-big-to-fail banks as soon as possible. Simply having a better understanding of the risks is not enough. The Fed and other federal banking agencies must incorporate identified climate-related financial risks into banks’ overall supervisory assessments and ratings to ensure the banks are addressing the risks instead of merely pointing them out, something they have failed to do, at least publicly. Furthermore, climate scenario analysis should be expanded immediately following this ‘pilot’ exercise to include all of the large banks that are part of the annual supervisory stress test.

“The risks that climate change poses to our economy and financial system are continually increasing as the effects of climate change become worse each year. The Federal Reserve and other federal banking agencies must move more quickly to address these risks before they have a potentially catastrophic impact on the livelihoods of all Americans.”

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Better Markets is a non-profit, non-partisan, and independent organization founded 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.