The U.S. Federal Reserve (Fed) on Thursday said it will let some of the largest U.S. banks through a pilot program next year as regulators push to help big financial firms withstand new threats. Six banks have announced that they will assess their exposure to climate risks.
Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo are participating in the Climate Scenario Analysis Program, the Fed said, adding that the plan “will allow supervisors and companies to It is designed to enhance our ability to measure and manage climate.” – Associated financial risks. ”
As a result, the bank’s capital and supervisory requirements will not be tightened. The exercise is “exploratory in nature and has no capital consequences,” the Fed stressed. the announcement“Scenario analysis helps companies and supervisors understand how climate-related financial risks may manifest and differ from past experience.”
The move is significant for central banks, which often lag other banks around the world when it comes to discussing and coming up with plans to police risks related to climate change.bank of england already similar exercise.
In the analysis, financial institutions will be assessed under hypothetical climate scenarios, with exercises beginning early next year and ending by the end of 2023. The Fed has started the process, it said.
Banks “analyze the impact of scenarios on their particular portfolios and business strategies,” and the board reviews those analyses. The Federal Reserve plans to publish high-level insights from the pilot program, but not company-level data.
“Our members recognize the need to adequately manage their exposure to climate-related financial risks and over the past several years have incorporated such risks into their risk management frameworks,” said the industry. said Barbara Hagenbaugh, spokesperson for the Financial Services Forum, an association. Represents 6 banks.
Emily Fritter contributed to the report.