Receiving wide coverage …
Fed weather alert
“Against a grim backdrop as abnormally cold weather wallops Texas,” leaving millions without electricity, Federal Reserve Gov. Lael Brainard warned that “banks and other lenders need to prepare themselves for the realities of a world wracked by climate change, and regulators must play a key role in ensuring that they do so,” the New York Times reported.
“Financial institutions that do not put in place frameworks to measure, monitor, and manage climate-related risks could face outsized losses on climate-sensitive assets caused by environmental shifts, by a disorderly transition to a low-carbon economy, or by a combination of both,” she said in a prepared speech.
Crises such as the one going on in Texas, Brainard said, “also matter for the financial system: They pose risks to insurers, can disrupt the payment system, and can make otherwise reasonable financial bets dicey.”
“Subjecting lenders to a ‘scenario analysis’ could help identify the risks they face from both extreme weather events and the transition to a greener economy, as well as project the potential financial effects,” Brainard said, American Banker reported. But she said “scenario analysis is distinct from our traditional regulatory stress tests at banks.”
Brainard “said financial firms should now begin a process of adapting to this reality, and while the change needed by firms will vary by institution, putting off the transition will come with increasing costs later,” the Wall Street Journal