Global banking regulators commit to addressing climate risk work
Business & Economy: The Basel Committee has placed a significant focus on evaluating the financial repercussions of extreme weather events in its climate risk strategies.
Global banking regulators agreed to focus more on understanding the financial risks posed by climate change on May 13, despite some opposition from the United States, Reuters reported.
The oversight body of the Basel Committee on Banking Supervision convened to review its climate-related financial risk initiatives and decided to prioritise understanding the financial impact of extreme weather events, according to a statement by the Bank for International Settlements.
This decision comes as policymakers in Europe and the US debate the role of climate change in central bank policy. In Europe, policymakers have doubled down on efforts to address climate-related risks, with the European Central Bank (ECB) making management of climate risks a key priority, while the US efforts have been scaled back.
The group of central bank governors and heads of supervision, which make up the oversight body of the Basel Committee on Banking Supervision, also plans to release a voluntary framework for 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 rule-making.
US takes a step back
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While European and British regulators are moving forward with integrating climate risks into bank supervision, the US regulators like the Federal Reserve have taken a more cautious approach.
Recently, the US has seen significant pushback, with US President Trump and other Republican leaders criticising climate-focused policies. In a notable move, the Fed withdrew from the Network of Central Banks and Supervisors for Greening the Financial System in January, and the US Treasury Department has also backed away from climate principles for banks.
Analysts predict that the US regulatory bodies, including the Federal Deposit Insurance Corporation, may follow suit and pull out of these joint climate agreements in the near future.
(With inputs from agencies)