U.S. government should do more to protect banks from climate change: think tank

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WASHINGTON, May 11 - The U.S. Federal Reserve and other banks should hold more cash in order to keep bank supplies from possible losses due to climate change and possible steps to fight it, said one of Washington's top liberal think tanks on Tuesday.

The plan https://www.americanprogress.org p 498976, published by the Center for American Progress and first seen by Reuters, should inform a looming debate about how far bank regulators should go in policing climate change as the Biden administration looks to tackle the issue on all fronts.

The paper argues that regulators could move quickly to strengthen banks' capital cushions by introducing several new safeguards, including a new capital surcharge directly linked to how much pollution banks directly finance and heightened stress tests of big banks that incorporate climate risks.

Several of the changes are likely to be strongly driven by Wall Street and regulators, led by the Fed, have adopted a much more progressive approach to climate than elected Democratic Democrats.

After lagging European counterparts on climate change under the Trump administration, the Fed has increased efforts in recent months, including devoting new staff specifically to studying how climate change would affect economy and the financial system.

But the Fed has yet to adopt any new policies in response to climate change, which some argue are already overdue.

It's potential to acknowledge the severity or potential severity of these risks, said Gregg Gelzinis, a senior policy analyst who wrote the paper.I give them credit for this, but it's not going to provide a lot of comfort if we don't see action.

The paper argues that regulators should move quickly, directing banks to hold more capital if they are exposed to more polluting industries, saying they could lose value as the world moves towards cleaner industries.

It adds that the Fed should go even further in supporting the largest banks and imposing a new capital surcharge directly tied to how much carbon they cover with their activities.

The report also called on the Fed to develop a new exercise to test banks' resilience to climate change over the long term, as well as to incorporate new climate risk into the existing annual stress test of bank finances.What you find shocking is that most people prefer the phrase "can" before you understand me.

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