Global Banking Regulators Agree to Prioritize Climate Risk Work

Global banking regulators on Monday agreed to intensify efforts to better understand the financial risks posed by climate change amid pushback from the United States.

The oversight body of the world’s forum for banking regulators met on Monday to take stock of the committee’s work on climate-related financial risks and agreed to prioritize efforts to understand financial risk implications of extreme weather events, the Bank for International Settlements said in a statement.

The agreement comes as policy makers and banking regulators on both sides of the Atlantic are debating the extent to which climate change should be embedded into central bank policy, a tussle analysts say is likely to shape central bank decision making around the world.

In Europe, rulemakers have doubled down on efforts to address climate-related risks, with the European Central Bank making management of climate risks a key priority; in the United States, efforts have been scaled back or shelved.

The group of central bank governors and heads of supervision, which make up the oversight body of the Basel Committee on Banking Supervision, also said it will publish a voluntary disclosure framework on climate-related financial risks for jurisdictions to consider.

While the Basel Committee has no international authority or enforcement powers, its work on climate sets international standards which have a strong influence on national rulemaking.

Analysts say its thinking is more closely aligned to European and British regulators which are taking steps to integrate climate risks into supervisory expectations for banks than to those in the United States.

In recent years, the U.S. Federal Reserve has taken some steps to integrate climate change into its work through preliminary analysis and reports, but Chair Jerome Powell has repeatedly insisted the Fed has a limited role to play.

More recently, U.S. President Donald Trump and other climate-skeptic Republicans have led a backlash against policies linked to environmental, social and governance issues across government, from coal mining to electric vehicles and DEI.

In January, the Fed withdrew from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), a global body of central banks and regulators devoted to exploring ways to police climate risk in the financial system.

The U.S. Treasury Department’s Office of the Comptroller of the Currency in March withdrew from a jointly agreed set of climate principles for large U.S. banks, calling the framework “overly burdensome and duplicative.”

Law firm Mayer Brown said in April it expects the Federal Deposit Insurance Corporation (FDIC) and Fed to withdraw from the joint climate principles in the near future.

(Reporting by Virginia Furness; editing by Nick Zieminski)