The Fed’s emerging climate oversight

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Fed Governor Lyle Brainard is filling in more blanks about how central banks can weigh and limit financial institutions’ exposure to climate risk.

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running news: “I hope this will be helpful for large banking institutions to provide supervisory guidance in their efforts to appropriately measure, monitor and manage physical climate-related risks,” she said in a statement. speech Thursday.

  • Brainard also said that the Fed is developing a “scenario analysis” to model financial risks and “assess the resilience of individual financial institutions and the financial system to these risks.”

why it matters: NYT call The speech is “the clearest sign yet” that the Fed will take the vulnerabilities of the big banks seriously. The effect of Brainard might also increase.

  • brainard is Allegedly In the race to become the Fed’s vice president for supervision. Randall Quarles’ term is coming to an end.
  • Quarles’ position on climate “move on” his remarks, Bloomberg report.
  • He is also a likely candidate for Fed chair if Biden topples Jerome Powell.
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yes but: The speech – citing a “novel combination” of risks – is clear about the uncertainties of trying to address the physical and transition risks facing financial institutions.

  • “While we should be humble about what the first generation of climate landscape analysis is likely to deliver, the challenges we face may not stop us from building the foundations now,” Brainard said.

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