March 23 (Reuters) - The Federal Reserve will establish a
new panel to assess and address risks to financial stability
from climate change, Fed Governor Lael Brainard said on Tuesday,
a fresh signal the U.S. central bank is intensifying its efforts
to manage risks to the financial system from global warming.
The Fed's new financial stability climate committee will
take a macroprudential approach to the issue, identifying and
finding ways to mitigate risks that could harm the financial
system as a whole, Brainard said.
The panel will work with a recently established supervision
climate committee that is focused on addressing so-called
microprudential risks at individual banks.
"It is increasingly clear that climate change could have
important implications for the Federal Reserve in carrying out
its responsibilities assigned by the Congress," Brainard said in
remarks prepared for delivery to the Ceres 2021 climate change
"Given the implications of climate change for both
individual financial institutions and the financial sector as a
whole, we need a framework that incorporates both
microprudential and macroprudential considerations," she said.
The Fed's two panels form the core "pillars" to its new
framework for addressing the economic and financial consequences
of climate change, Brainard said, adding that those risks
included the potential for shocks to the financial system that
could ripple out to harm households, businesses and communities.
Senate Republicans last week sent Fed Chair Jerome Powell a
letter expressing concern that the Fed would use its bank
supervision powers to "further environmental policy objectives,"
going "beyond the scope" of the central bank's mission.
Those Republicans said they were particularly worried about
the use of climate scenario analysis, adding that the Fed lacks
jurisdiction and expertise in such matters.
Such scenario analysis, Brainard said on Tuesday, could be a
"helpful tool" for the Fed, providing "a structured way of
uncovering the parts of the financial system where physical,
transition, and other risks may have outsized effects through
The newly established panel, she added, is part of the Fed's
effort to build expertise capacity and knowledge to deal with
(Reporting by Ann Saphir
Editing by Paul Simao)