A group of Republican senators this week cautioned Federal Reserve Chairman Jerome Powell that using financial regulation and supervision to advance environmental policy objectives “would be beyond the scope of the Federal Reserve’s mission,” and urged against taking additional actions with regard to climate-related risks. The lawmakers pointed out in their letter that “banks are in the best position to assess and price for risks in their portfolios,” and that they are already monitoring and pricing in climate-related risks.
“Simply put, financial regulation does not and should not seek to guard against every type of unforeseen event; rather, it should ensure that financial institutions are resilient and have the capability to withstand unique economic and financial market stresses as they arise,” the lawmakers wrote. “As you continue to analyze the potential implications of climate change for financial institutions and markets, we urge you to remain mindful of both the inherent challenges of modeling severe weather events and the limits of the Federal Reserve’s statutory authority in this area.”
