Climate change does not pose such “significantly unique or material” risks to financial stability that the Federal Reserve should treat it separately in its management of the financial system, Fed Governor Christopher Waller said. on Thursday in a detailed rejection of demands for climate initiatives by the US central bank.
“Climate change is real, but I don’t believe it’s a serious risk to the safety and soundness of the big banks or the financial stability of the United States,” Waller said. told a economic conference in Spain. “Risks are risks… My job is to ensure that the financial system is stable against various risks. And I believe that the risks posed by climate change are not sufficiently exceptional or material to merit special treatment. “
The purpose of the Fed’s management and stress tests on bank balance sheets, he said, is “general stability, recognizing that we cannot predict, prioritize, and adapt specific policy to each and every shock that can happen.”
“In March we looked at a bank run on Silicon Valley Bank” that raised attention to the level of unsecured deposits at some institutions, Waller said. “Those are the kinds of things I’m looking at right now. I’m not worried about the climate as much as things like banks failing due to bank runs.
In general, the Fed has taken a more conservative stance on its responsibility for climate issues than its European counterparts, with Fed Chair Jerome Powell saying that the US central bank is not a climate policymaker and not divert capital or investment from the fossil fuel industry. , for example.
The Fed is considering developing a set of “suggested principles” for large banking organizations to manage climate-related financial risks, an idea that Waller opposed late last year. .
In his remarks on Thursday, Waller said that science has “firmly established” climate change. But in assessing financial stability, U.S. central bankers should ask only if the changes have a “near-term” impact, with potential losses large enough to affect the macroeconomics, he said.
Waller argues that they won’t, as banks are already adept at hedging against weather-related losses, while slower-moving changes – in housing patterns in coastline as sea levels rise, for example – similar to the population loss seen for decades in cities like Detroit, locally important, but not systemically.
The so-called “transition risks” to a low-carbon economy, on the other hand, “are generally not near-term or likely to be material due to their slow-moving nature and the ability of economic agents at the price of transition costs … There seems to be a consensus that smooth transitions do not pose a risk to financial stability,” he said.
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Climate Change
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