Transcripts For CSPAN2 Regulators 20240704

This morning on Capitol Hill Bank regulators are testifying on climaterelated Financial Risks and Monetary Policy. They are appearing before the House Financial Services subcommittee. We will have live coverage here on cspan2 when that hearing gets underway. [inaudible conversations] the committee will come to order. Without objection of the chairs authorized to declare a recess at any time. This hearing is entitled climate risk are financial regulators politically independent . Without objection all members will have five legislative days within which to submit extremist materials to the chair for inclusion in the record. I now recognize myself for four minutes to give an Opening Statement. Federal regulators represented here today have coordinated to promulgate principles for managing climaterelated Financial Risks. The guidance and information requested by the regulators aligned with a 2021 executive order, efforts promoted by the Financial Stability Oversight Council. Chair yellow and recommendations from various international and local governments organizations. The Federal Reserve is extendin extending, extending for this with a mandatory supervisory climate Scenario Analysis and form a formal collaboration with treasurys office of Financial Research on climate data and analysis. Which the board of governors never voted to approve. F secretary yellen has repeated identified Climate Change as an existential crisis and is called a Climate Change quote and emerging and increasing threat to Financial Stability and quote. Following the administrations posture on climate within financial risk, regulators have begun inserting Climate Policies into Bank Regulation and supervision part there is little transparency about regulators climate efforts and what occurs in administration led climate working groups or International Global governance organizations. 4fourmac knows that been attached to this hearing to grasp this lack of transparency and regulatory capture theres also lack of transparency about funding of some of the climate related efforts of the International Organizations including the tangled web of financing associated with a network of Central Banks and supervisors for greening of the Financial System. Theres nothing wrong with regulators wanting to learn more about data methods and analysis or to ask questions of bank about what theyre doing. No one Police Financial institution should ignore not fully understood risks. But we and the regulators know that institutions are already analyzing climaterelated Financial Risks and many large institutions of public facing Information Available describing how their monitoring and managing this risk. Yet summer after an executive order was issued an f sock make pronouncements of the regulars that a sudden need for coordinated public facing corp. To paint a guiding principle for climate risk that Research Says are manageable. Regulators i think the efforts are intended to help banks manage risk that are not yet fully understood even by the regulators. With the underlying premise some of the predigital regulation are better than the private sector picked that seems odd given the fed says must exercise humility about spotting risks and they could even help institutions manage Interest Rate risks. The feds pfister for supervision promises as he did with Silicon Valley banks failure to write a public facing report of his personal of the special assessment of what is climate Scenario Analysis reveals using data that congress will not be able to seek to corroborate his findings. At best existing climaterelated financial risk analysis potential long run correction analogy financial and economic effects of alarming climate futures but to think existing analyses can predict near term effects of projected Climate Change is five, ten or 100 euros out is misleading and false advertising or climate models are typically unwieldy mongrels characterized by cascading uncertainties as a mixandmatch inputs and outputs from economic, climate ocean to which her and other modules to produce questionable numbers with highly questionable predictive content. There are so many degrees of freedom available to climate analysts that like a cooking soup with a cabinet full of spices you can get whatever flavor results you would like to theres nobel prizewinning economist boris hansen councils to regulars and sector banks quote their credibility will be further enhanced by avoiding the temptation to exaggerate our understanding of Climate Change and quote. On Climate Policy driven by Biden Administration directives, regulators are choosing politicized policymaking putting their independence at risk and giving into the temptation to exaggerate our understanding of Climate Change. That yarnell recognizes the Ranking Member of the subcommittee on Financial Institutions and Monetary Policy the gentleman from illinois mr. Foster for an Opening Statement expert thank you, chairman and think to witness her for being here today. Thank you to our regulators properly and thoughtfully responding to the changing risk profiles of the Financial Systems as our world changes the important participant in our Financial System remain well a price of new and emerging risks and to support our regulators help them stay well posture for the truth. History tells us systemic financial risk do not come from politically driven older reaction to emerging risk but rather from regulatory capture properly defined, which is the use political power by economic incumbents to use their political power to restrict the ability of regulators to respond to a new embryo financial threats that powerful incomes may find inconvenient to acknowledge. We saw that most recently in the financial collapse of 2007 which was pursued by more than 20 years of great moderation lasting from about 84 hyphen 2008, low volatility continuously and continuously rising asset prices including home prices that rose faster than gdp but also a Banking System and middle class that became leveraged beyond all reason and an economy completely dependent on contingency rising asset and real estate prices which was obviously unsustainable from First Principles just as it is scientifically unsustainable to continue putting Greenhouse Gases into her atmosphere without suffering severe economic consequences. However, in 2007 as old as many times in our history the political, economic incumbents encourage or forced regulators to keep their heads in the e and so instead of responding to what was then euphemistically called the subprime crisis, at the tip of a much larger iceberg of Systemic Risk come in 2008 the Bush Treasury Department put out a blueprint for financial modernization which incredibly proposed even further deregulation of an already shaky Financial System so the threat of political influence on our financial regulators is real. And Climate Change it does pose Systemic Risks to our nations Financial System. The destruction waged by stronger hurricanes and tornadoes more intense floods and droughts Sea Level Rise and wildfires threatens businesses banks and Credit Unions across our country and when a large swath of the regions businesses of homeowners faced major losses all at once, when it is catastrophic from one of these catastrophic weather systems, Financial Institutions that issue loans or entrance to them entered must swallow large swaths. At activated system i stupidlye regulators must ensure banks are able to weather the literal and figurative storms. On the investment level in order to effectively manage their own risk shareholders must have excellence and information regarding a companys exposure to climate related risks. We cannot allow americans to lose their Retirement Savings because acknowledging the realities of Climate Change has been overshadowed by partisan politics. The federal financial regulars including feet fdc has promulgated regulations to address systemwide investor level risks and i plugged in for doing so for my republican colleagues seems to have called the street from 30 regulations represent a lack of political independence by the agencies that they responding to democratic pressure to raise the alarm about the impacts of Climate Change but however,e danger lies in the other direction in a politically driven under reaction. These rules recognized around climate risk to our Financial System peer if hearings like this one into pushing regulators to bury their heads in the sand and ignore climate risk would create a great economic distortion and risk unnecessary failure of our Financial Institutions. And hard orange ordinary as that inevitably follow strict i applaud episodic and the sec for funk the site and considering the financial risk posed by Climate Change in spite of political pressure and i look forward to hearing from our Witnesses Today to show how we can further increase transparency and mitigation surrounding Financial Institutions climate risk. The gentlemans time has expired. The chair that recognizes that youre of the subcommittee on oversight and investigations and leader of environmental social and Government Working Group the gentleman from michigan mr. Huizinga for one minute. Appreciate you allowing me to attend and wellintentioned but misguided government mandates are nothing new in washington. However the radical shift by this administration to about esg policies into every thousand of our society outside of the legislative process has reached a critical breaking point as making regulators continue to push for the disclosure of climate within information of which have little or no experience with Small Businesses as well as low and middle income families across the country continues to be crushed by soaring costs stemming from President Bidens failed economic agenda for instead of feeding their obsession to become Climate Policy makers often picking winners and losers regulators should focus on sound banking policy that wont e americas driver Energy Independent and increase Economic Opportunity for all the public it will not idly stand by angela bacon regulators on their own to channel channel credit to politically desired sectors bypassing congress to so thank you mr. Jim for allowing me to join your subcommittee and i look forward to hearing from the witnesses spirit the gentleman yields back. The gentleman from california is not here, and so we will move on to witness testimony today we welcome the testimony of mr. Greg coleman. Mr. Coleman is a Senior Deputy comptroller for Large Bank Supervision at the office of the comptroller of the currency ms. Darlene eberle, ms. Epperly is a director division of Risk Management and supervision at the federal Deposit Insurance Corporation dr. Michael gibson, dr. Gibson is director of the division of supervision and regulation at the board of governors of the Federal Reserve system. Mr. Rendell jones, mr. Jones is a deputy executive director of the National Credit Union Administration. At the audible sister in antarctica the treasurer of coconino county, arizona. Welcome to washington peer thank you for being here thanks to all of you for your service ever taking time to be here for each of you will be recognized for five minutes to give an oral presentation of your testimony here without objection each of your written statements will be made part of the record or mr. Coleman you are not recognized for five minutes to give your oral remarks. German bar, member foster members, thank you for the update to. Today to discuss the option engine committees around climate with financial risk. The emojis is an independent bureau of the department of the treasury and its mission is to ensure National Bank federal Savings Association operate in a safe and sound manner provide for access to Financial Services, treat customers fairly and comply with applicable laws and regulations. Consistent with that mission one of the occs current ungreased effect on climate risk due to the increased frequency, severity and volatility of weather events to affect the value of financial assets, borrowers credit would and the associate risk expected onto the Balance Sheet our focus for this priority is on the largest banks i would like to stress the occ does not and will not tell bankers what customers or legal businesses that may or may not bank but rather we are committed to staying focused on banks Risk Management of climaterelated Financial Risks exist focus is rooted and remanded to ensure National Banks and federal Savings Associations operate in a safe and sound manner. The occ has a purse climaterelated financial risk the same with the agency approaches in emerging risk. To work with the regulated institutions, to determine if they have appropriate processes and procedures in place to address the risk. In december 2021 the occ issued for Public Comment draft principal designed to support identification and management of climaterelated financial risk that occ writing that institutions with more than 100 million in total assets. Limiting the scope of guidance to large bright which have begun to monitor this this emergs intentional because their exposure to may be material. The draft principles describe general considerations related to Bank Government policies, procedures and limits, strategic planning, Risk Management, data and other areas they provide considerations for how climaterelated financial risk can be addressed in the traditional risk categories including credit, liquidity, Operational Risk and others. The agency has defined feedback in all aspects of the draft principles and were continuing to work, consider the comments received are we are working with her interagency called us to determine the next steps in this area. On their own initiative large banks that they can incorporate a climaterelated financial risk in the Risk Management frameworks and policies to understand the climaterelated financial Risk Management programs the occ began reviewing this information in 2022. My testimony describes our initial observations from these fees. In general the large banks we supervise are in various stages of developing processes to measure and monitor the potential exposures to physical and transition climaterelated Financial Risks. I stress Community Banks are not the focus of our climaterelated financial risk efforts to based on decades of experience in the local Communities Community bankers are very fibbing with impacts of weather events upon the customers and business. Further, these banks have long managed the risk of localized weather events present at the occ does not intend our efforts aimed to large bextra trickled out to Community Banks to however, active, close to has suggested we be mindful of his wrist enter thought about they continue to manage them appropriately. To ensure the occ is aware of the climaterelated financial Risk Management efforts of other federal government and International Bodies, the agency as a member of the Financial Stability Oversight Councils climaterelated Financial Risk Committee currently participate in the Basel Committee on banking Supervision Task force on climate with the financial risk at the Network Central banks and supervisors. Our efforts with his International Bodies allow the occ to ensure awareness of and facilitate information sharing with our fellow regulators. In closing occ is committed to assessing climaterelated financial risk at banks with over 100 million in consulting assets for a Risk Management perspective. This approach is consistent with how the Agency Response to emerging risks to the Banking Industry and to ensure National Banks and federal Savings Associations continue to remain safe and sound, provide for access to credit and treat customers fairly good thank you and ill be happy to answer your question. Thank you for your testimony pick ms. Eberley youre recognized for five minutes to give your oral remarks. Chairman barr, Ranking Member foster [inaudible] agency carries out this mission [inaudible] and orders resolution of banks including systemically important Financial Institutions peer the agencys role with respect to Climate Change is upon the financial risk for Climate Change and the extent to which those impact the fcic core mission and responsibility. My testimony today will provide a general discussion of the fdics general tenet of climaterelated financial risk, efforts to collaborate on this topic with those federal agencies, stakeholders and International Organizations [inaudible] as they develop plans identify, monitor and manage a financial there is broad consensus among financial rating try bodies both domestic and abroad effects of Climate Change in the transition [inaudible] present unique and significant economic and Financial Risks and, therefore, an emerging list of the Financial System [inaudible] the Financial System has always had Severe Weather events to contend with and thus far the Banking Industry has handled these events will however, changing climate conditions are bringing with including the rising sea levels and increases in the frequency and severity of extreme weather events. In addition to these transition material risk to the Financial System and Banking Institutions in several ways. Transition is generally the first [inaudible] continues to remain resilient despite the rising risks. I would emphasize the fdics is not responsible exit responsible for Climate Policy and will not be involved in determining with which Financial Institutions these types of credit allocations of Business Aspect [inaudible] in order to understand and address the financial risk Climate Change closer to the Financial Institution in the Financial System the fdics has undertaken efforts to foster an open dialogue with her counterparts in u. S. With International Financial regulatory bodies and especially with stakeholders in the Banking Industry peer fdics coordinated with our interagency appears participating on the oversight and has joined supervisors in the Financial System with the Federal Reserve and office of the comptroller of the currency to Foster Collaboration and share best practices in addressing is complements our existing work on climaterelated financial while the fdic remains in the early stages regulars need to work with the Banking Industry now to support Financial Institution as they develop plans identify, monitor and manage financial risk posed by the Climate Change peer this collaboration should be conducted in the manner that is flexible enough to allow for change new methodology. Consistent with this approach the fdics issued a request for comment in april 2022 on principles that would provide a highlevel framework for large Financial Institutions peer take a riskbased approach and specific with Risk Management framework rules and guidance. The fdic is looking to work with the occ and Federal Reserve defined later this year. The fdic remains committed to engaging with the public, industry stakeholders and members of congress apologies. On the issues outlined in my testimony could i look forward to answering your questions. The gentleman, gentlelady yields back, and now the chair recognizes dr. Gibson for his oral remarks. Chairman barr, Ranking Member foster and members of the subcommittee, thank you for the opportunity to discuss the Federal Reserves supervisory work related to the Financial Risks of Climate Change. The Federal Reserves responsibilities with respect to Climate Change are important but narrow spirited responsibilities are tightly linked to our responsibilities for Bank Supervision and Financial Stability. Because Climate Change could pose challenges for the Financial System, it is important we better understand these risks. Our primary focus is to evaluate whether banks operate in a safe and sound manner and manage all material risks including climaterelated Financial Risks before proceeding it is important to emphasize two general points about our supervisory approach. First the Federal Reserve recognizes that decisions about policies to address Climate Change itself should be made by the elected branches of government peer as chair powell stated earlier this year the Federal Reserve is not a Climate Policy banker. Second, it is not the Federal Reserves policy to discourage banks from offering accounts or services to any class or type of lawabiding business and this is not a part of the work look into climaterelated financial risk. Our supervisory work related to the Financial Risks from Climate Change is based on our core responsibility to ensure banks understand and appropriately manage all material risks include image related to Climate Change peer weaknesses and how banks identify measure monitor and control climaterelated Financial Risks could adversely affect a banks safety and soundness. To fulfill the supervisor responsibility the Federal Reserve is working to better understand the potential implications of Climate Change for supervised banks. I will briefly discuss two nearterm supervisory priorities for the Federal Reserve related to the Financial Risks of Climate Change peer issuing interagency guidance from large banks and conducting a Pilot Climate Scenario Analysis exercise. Last december the Federal Reserve after i couldnt ask for public guidance provided a highlevel framework for the statements and management of exposures to climaterelated Financial Risks for large banks. For guidance which apply only to banks with over 100 million in total consolidated assets to the proposed guidance contains highlevel principles and describes how climaterelated financial risk can be addressed in specific potential risk areas. We intend to coordinate with occ and fbi see it issuing any final guidance to promote consistency across supervision of large Financial Institutions. Climate Scenario Analysis in which the resilience of Financial Institutions is reviewed under different climate scenarios is an emerging Risk Management and supervisory tool used to evaluate climaterelated Financial Risks. The Pilot Climate Scenario Analysis launched in january was designed with two objectives peer to learn about large banking organizations climate Risk Management practices and challenges, and to enhance the ability of both large banking organizations and supervisors to identify, measure, monitor and manage climaterelated Financial Risks. I should emphasize with you climate scenario analyses as distinct and separate from the Federal Reserves supervisory stress test picture Federal Reserve stress test is designed to assess whether large banking organizations have enough capital to continue lending to households and businesses during a severe recession and Financial Market shock. The Pilot Climate Center Analysis exercise on the other hand, is exploratory in nature and does not have consequences for bank capital or supervisory implications. As i mentioned earlier the Federal Reserves role with respect to Climate Change is important but narrow. The Federal Reserve has a duty to understand risks to the safety and soundness of the bank stayed overseas into the Financial System including the Financial Risks from Climate Change. Thank you. I look forward to your questions. Thank you. And now mr. Jones you are recognized for five minutes. Good morning chairman barr, Ranking Member foster and members of the subcommittee. Thank you for inviting the National Credit Union Administration to discuss the agencys activities regarding climaterelated financial risk by nimitz Rendell Jones Atlanta Deputy executive director for ncua. As a regulator and ensure that ncua is responsible examining and supervising the credit Union Resilience against all material risks the agency believes Credit Unions are best positioned to assess various risks including climaterelated Financial Risks and opportunities within their specific fields of membership. In my testimony i will summarize recent voluntary request for information. In late april at a Public Meeting of the ncua board the ncua issued a request for information rfi seeking input from stakeholders and subject Matter Expert to strengthen the agencys ability to identify and understand Credit Unions current and future climaterelated Financial Risks. Vector and forgo it issuing the rfi are twofold. First, the agency seeks to improve its understanding of climaterelated Financial Risks compact Credit Unions and view them, and how it can best support the industry and mitigating them. And second, agency aims to better understand the products and services Credit Unions, offer to Leverage Opportunities presented by any related transitions in key economic sectors. In the driveby rfi three agency requested feedback and included a question for the public to solicit input on a flight of topics including climate related physical and transition risks that are affecting or may affect the industry in the future, potential adjustments to operations, governments and Business Strategies to mitigate those risks, and methods, metrics and tools identifying and measuring those risks. And climate related Business Opportunities including the support needed to expand products and services and any barriers that Credit Unions might face. The Comment Period not close in june and agency received 44 responses from individual Credit Unions credit union trade association and other interested parties. Insights derived from the responses divided by stakeholders will be essential in shaping any future efforts in this area. As noted in the rfi, ncua does not plan to use information collected in the examination and supervision of individual Credit Union Spirit any requirements for Credit Unions associated with climaterelated financial risk would require changes to existing examination and supervision procedures and approval by the trend for board. The Credit Union System remains wellcapitalized, stable and wellpositioned to handle various economic possibilities. The traveler continues to monitor for any material risk including climaterelated Financial Risks to Credit Unions perfect and help us to build at the National Credit union here thank you for the invitation to testify before you today and i look forward to answering any questions you may have. Thank you. Ms. Benatar, you are recognized for fiber. One, Ranking Member and distinguished members of the House Financial Services committee. My name is Sarah Benatar and i serve as a treasure tro county, arizona, the second largest county area in the country. In addition to this i am president about the Arizona Association of counties International Association of hispanic county officials. Eyes as treasurer f Investment Officer for the entire county responsible for the safekeeping of public dollars on deposit with the some county departments to a special district such as schools and Fire Districts. My fellow county Government Official across the country spent days and nights worrying about potential risks that would cost taxpayers money and could jeopardize our ability to pay for the hardworking first responders, road crews and other Public Servants in our communities. In managing public finds its important to always put the safety of public dollars first followed by addressing liquidity needs, and lastly working towards a positive rate of return in short, safety first, then liquidity, then yield this necessarily includes considering all forms of risk including climate risk. These priorities ensure that we are the best stewards of public funds. Unfortunately we are seeing a National Trend that jeopardizes our top priority to ensure the safety of taxpayer dollars. Across the country legislation is being introduced that will reduce the universal banks within with our treasury can do business with, what we can invest in and what policies we can adopt to evaluate risk associated with public fund management. Many others of this propo want to depoliticize Financial Regulation instead new political tests that protect special interest for market competition. Furthermore, when the rubber meets the road in implementing these bills they raise cost to our taxpayer every jurisdiction need to servicing back to the free market rfp process is vital to ensure the protection of taxpayer dollars but it only works if there are sufficient bidders for a free market to exist. Responses to government rfes are limited to collateralization and pass that requirement. With only handful of banks even servicing government. Simply put, an antidst legislation will push numerous bidders out of the process entirely correct at best local governments would be left with one option to select from and would suffer from higher costs. At worst, we would receive no bids leaving us without Servicing Bank and changing local government as we know it. How will i pay my firefighters were multi weeks assignment if i cant direct deposit because we dont have a bank . This reduction in size of the market for public Banking Services is a reality not hypothetical for local governments and states are antiesg legislation has passed in addition to Servicing Bank fees, treasurers are responsible for the investment of public funds the foremost object in government investing is the safety of principal. This means mitigating and evaluating risk of Investment Decision in both the shortterm and longterm care as a prudent fiduciary i believe Climate Risks are part of that analysis of safety that must be considered to honor my duty as care and duty of loyalty. Over the last year about my county has faced wildfires, flooding events, tornadoes, record snowfall standout record heat levels. When determining whether to invest in a Corporate Bond i should have the ability to evaluate the risk of that investment by asking questions like is a major Distribution Center at this company in ina disaster area . Safety public finds this about evaluating risk with other tools and our toolbox but it is up to us as prudent local Investment Officers to decide which tools we want to use. These concerns are shared by local officials across the country regardless of party or we want what is best for our communities. We want to keep taxpayer money safe. We want free market so we can get the best value. We want the ability to make choices ourselves and who we do business with and how we invest our public dollars per there is no better illustration of this kind of bipartisanship between the county treasures in arizona who have stood together to oppose legislation that would jeopardize our ability to be good stewards of public dollars that there i urge you to listen to the dedicated Public Servants who are elected by communities within your districts to the associations of businesses who have spoken out against these measures and to the average citizens who just want the taxpayer dollars protected. Thank you for your consideration. Thank you. We will now turn to member questions pick up the chair t recognizes himself for five minutes for questioning doctor coleman come in your testimony you quoted chair powell saying the Federal Reserve is not a Climate Policymaker. You also said it is not end there has been the Federal Reserves policy to discourage banks from offering accounts or services to any class or type of lawabiding business, and this is not part of the work. Mr. Coleman, you and your task list at the occ is not and will not tell bakers what customers or legal businesses that may or may not make the ms. Eberley in your testimony fortunately you point out the fbi will not be involved in determining firms or sectors with which Financial Institutions should do business pick these types of credit allocation decisions are the responsibilities of Financial Institutions. What this hearing is going to be about though is why members of congress and Market Participants and banks and the customers are skeptical because of these assurances. Because doctor coleman, when you say this climate Scenario Analysis exercise that the fed is undertaking will not have consequences for bank capital or supervisory implications, what we say is not yet. At least not yet. Want to know where this is going. And so to that end we want to talk, dr. Gibson, first about, about what the fed is doing as part of the in gfs here and let me just start with mr. Coleman actually picked mr. Coleman can you tell me about what the occ knows about finding at the network of Central Banks and supervisors for the greening of the Financial System including who finds work on climate analysis . In your answer can you specifically address this group called the International Network for sustainable financial policy inserts Insights Research and exchange, or inspire . Thank you for the question. I am not aware of the funding structure for these organizations. The occ participate in these organizations along with several other international and domestic regulatory bodies. And dr. Gibson, can you answer the him same question about the but what the fed knows that ngfs on ff involvement of inspire or the pastor Funding Organization climate works . I also dont know anything about the funding of the injury at this picture we do participate in emitting and in the working groups. Well, if there is fog of climate works in funding ngfs climate model Data Scenario and alight with the fed have concerned about politics creeping into your climate work given that the current Senior Advisor Senior Advisor to President Biden for Clean Energy Innovation and implementation had for years been an influential member of the board of climate works which at least in 2021 held more than 130 million in assets to distribute for environmental activist grantmaking . We participate in these International Groups in order to learn from our foreign counterparts, and participate in the discussions about international standards, but thats the extent of it. Well, to mr. Coleman, ms. Eberley and to dr. Gibson, how many meetings other than between officials in the post e of your agencys and ngfs since january 2021 . I do not have an answer to the specific number of meeting. I dont know the number either. I dont know the exact number to reduce participate in their meeting. How many people are you dedicating to traveling to these meetings ngfs . I dont think with anyone dedicated just to the ngfs, and most of the beats are virtual. Well, can any of you describe besides just discussing and listening, what other work are you doing with this International Body come ngfs network would find an accounting of that work. With the ngfs publishes on the website that work plan and other work products, so i think everyone has access to the work that they are doing. Are there ngfs workstream papers or models . I guess let me just in my remaining time let me just get to the point. Members of congress and the American People are very concerned about extraterritorial reach of this opaque, i need you all cant even answer these questions, this opaque, mysterious International Body that apparently is influencing the agencies that are regulating our banks to so not only is there an opacity with whats going on here, we have this International Body that is potentially impacting decisionmaking what we are worried about is where this is going to have an International Body influencing regulators to pressure Financial Institutions, maybe not now but eventually to force them into credit allocation decisions that are entirely inappropriate with that my time has expired and at ever recognize the Ranking Member of the full committee ms. Waters from california for five minutes. Thank you very much. Ms. Benatar, while House Republicans are focusing on federal regulators of banks and Credit Unions, democrats thought it was important to have additional local Government Perspectives on what antiesg attacks mean for the banking relationships. I understand that earlier this year you lead a ladder find by democrats and republicans, county treasures in your state opposing antiesg legislation that would have limited their ability of certain banks and others to do business in the state of arizona. What would the impacts of this legislation be on your accounting as work as a county treasurer . Have you heard similar concerns from other local or state treasurers and other parts of the county . We have heard from other states that are passed the legislation that it has increased their costs and it is also reduced the number of companies they can do business with. So my role as president of the National Association of hispanic county officials has allowed me to connect with my colleagues across the country, and studies are also have come out that are saying the same exact thing you look at texas. Texas is going to result in billions of dollars and buy another paint an additional 300, to 500 million just to do bond interstate. You look at florida florida has a higher rating than california. Yet they are paying higher Interest Rates to the antiesg legislation that are passenger so that was a concern of ours in arizona because we are very limited in who we can do business with right now. And reducing the number of Financial Institutions that we can work with will have dire consequences within our communities and will cost our taxpayers money. Can you give us some insight on what has been alluded to here today about pressure that is being placed on banks and our Financial Institutions from these foreign entities worldwide, et cetera . What do you know about that . So i have a fiduciary duty. I have a duty of loyalty to the residents of my county, and for me the most important thing is the Public Safety of our dollars. Not just for today but for generations to come here and doing that i have to look at best practices. And that includes things like climate risk analysis in my decisionmaking. That includes looking at regulations. That includes being able to find the information so i am, im analyzing risk to the best of my ability. This is also noted by Nonpartisan Organization for government financial managers across the country. So i need to be able to easily access that information including climate risk when i am evaluating my Investment Decisions but also by cash flow analysis. Although i may not know the information necessary about the International Groups, i do know the best practices out there that i do need to follow in the work that i do. You have alluded to your fiduciary responsibility, and in alluding to that what youre saying is you must take into consideration all of the possible risks et cetera as you make decisions. Do you have any further comments about fiduciary responsibility . Because thats a very, very key when we dealing with our Financial Institutions, banks, et cetera. Thank you, peter no, that is a number one priority of mine that it is the number one priority of Government Officials across the country. That everest and local govert safety will always come first, then liquidity, then yield. For me climate analysis and climate risk is real here in my communities we have been facing fires and flooding for well over ten years. Without using that including climate analysis in my daytoday work i would not have the cash flow available to be able to free up the money not just for my Fire District for five but for the 20, 30, 40 or flooding events will now be having. That also means for my Investment Portfolio Management i need to make sure i am considering that as well for me safety will always come first because taxpayer money is at stake. I thank you for the very profound information. As you know im from california and weve had fires that come unprecedented in the state of california. So i hope that you and arizona, california and other states that are experiencing these kinds of devastated natural causes, that you will have the kind of information that you need to help people understand exactly what is going on with climate risk. Gentle latest time has expired. Mr. Posey is not recognized. Thank you very much, mr. Chairman, and i think all the witnesses for your testimony and your time to appear before us here this morning. At the Financial Stability Oversight Council hearing before the Senate Banking Committee Just about a year ago, senator toomey asked secretary yellen if thered been a single failure of a Financial Institution as a result of a Severe Weather event. She acknowledged she wasnt aware of such a failure. Can any of you identified an example where a flood, hurricane or wildfire has resulted in a Financial Institutions failure . I will start i guess ask each of you to answer we will start with sector benatar and come across. I will personally say insurance Financial Institutions Financial Institution i do not know any knowledge but i do want to point out that you answered my question, thank you. Mr. Jones. There were two met Credit Unions that failed as result of impact of hurricane katrina, one causing a loss to the shared Insurance Fund of about 500,000. Okay. Mr. Gibson. Not aware of any Bank Failures that could be attributed directly to Climate Change. Ms. Eberley . As a mentor, no failures contribute to Climate Change or whether if its the same answer, not the with any Bank Failures related to weather events. Experts tells tell stoo plaintiff climate related risk, natural risk, and the risk to financial positions for transitioning away from things like fossil fuels to other energy sources. Can you please give a clear concise example of a credible material and imminent financial risk from Climate Change that warns the government opposing climate management discipline of Financial Institutions . At the expense of climate analysis at this time. We will start with you. Thank you for the question. I would start with the physical risk appear so, for example, you could have an institution that relies upon the collateral value of some type of property. That probably was impacted by a climaterelated financial risk that impacts the value of that collateral picked that could impact the ability for that property to cash flow which could impact the value of the set thats affect that asset to the institution. Ms. Eberley. Institutions have relied on insurance to mitigate the risks of weather events and institutions are experiencing, borrowers are experiencing an increase in cost of insurance and that the effects of institutions s underwrite loans to make sure borrowers can continue to repay in the future also rely on the value of the collateral pledged, if you need her so thats been what impact appear at the insurers pulling out of states have generally contributed to the increase in cost for insurers to undertake the risk because of the increase in severity or frequency of weather events. Thank you, very good. Mr. Gibson. Another category of climate risk transition risk, those at risk from changes in Market Sentiment or Consumer Preferences or policy technologies that affect comp that are driven by Climate Change. For example, if a borrower has a concentration and a particular technology that becomes obsolete because of changes do to Climate Change and new technologies, that could be a risk to a banks credit worthiness. Thank you. Mr. Joe. What i would add is i agree with ms. Beverly regarding insurers pulled out of certain states and making the cost of owning a home much more expensive and cardigans have reported to us they are sink epic the other thing i would add is weve also seen not just the risk side but the opportunity side and Credit Unions being a very resilient and respond to the needs of the membership and decide Consumer Loan projects specifically targeting Green Energy Products and the like. We think that Business Opportunity side of that as well. Thank you very much for. On a local level it impacts our budgets it will result in significant increases to our expenditures which means we need to make sure cash is available without actually selling bonds at a loss or positions to free up the money. Which ultimately resulted increases to our taxpayers. Thank you all very much. Track to my type is about to expire so i yield back. The gentleman from illinois dr. Foster is not recognized. Iq. I guess i will start with dr. Gibson looking interNational Banking regulation, are we considered laggards or leaders or summer in the mainstream understanding to Climate Change . I would say we are with our International Counterparts and other supervisors and identifying Climate Change as an emerging risk to banks and the Financial Stability and we are all learning from each other i would say. Thank you. Participating in forms that are funded for example, by the Financial Service industry and so on. Do you spend a lot of time looking at the details of who is funding the different forms or do you look at the quality of the ideas presented in those forms . Well, i mean i think we spent most attention in the International Forums on the content of what can we learn from others. We do Pay Attention to who finds different forms and we have ethics rules about things like that. That Climate Change is only one of the future risks that we have to look at. Obvious examples are like artificial intelligence. If i was worried about the credit union that provided Financial Services to actors in hollywood screenwriters, i might be very worried about my Financial Health in the coming years due to artificial intelligence, or just his life extension therapies. Its very likely many more americans are going to be outliving their lifesaving spirit things like technological threats are coming in. Is there a general risk framework where you prioritize the different future risks, or do you handle these on one off basis . I will start with mr. Coleman. Thank you for the question. At the occ we are focused on safety and soundness of the institutions we supervise. Dating back to 2014 when the occ implemented our heightened standards of regulation which addressed Risk Management frameworks for the largest most complex banks that we supervised, that link out our expectations for any type of emerging risk whether they are internal or external that could impact the risk profile of the constitution. We also work with our national Risk Committee to better understand the emerging risk that our examiners are staying in the field that we need to address those. If you refer to are most recent perspective you see we can focus on a flight of risk including liquidity, compliance, operational credit risk we take a holistic approach looking at these and apply an approach to ensure we are taking a risk based assessment of his risk and how they could impact the institutions we supervise. You also have to consider exogenous risk that dentalt Management Practices inside the financial Banking Industry also things like pandemics. Theres a long list of things that could really disrupt is there an ongoing process that says here is our list of tail risks we are worried about, heres what her current evaluation of how we should prioritize them . Is a better a general procedure here or is this sort of do you handle them individually . Individual . Thats part of our national Risk Committee process and we publicize the findings of the national Risk Committee twice a year on a semiannual risk perspective. Remember offhand what the top five risks are . Did you break the risks you will read about coming on . In the most recent semi risk perspective the top four risk we identified were liquidity, compliance, operational credit risk to the largest institutions. There will be interesting and there will be more details on the. Gentlemen from missouri is now raised. Thank you. German how did acClimate Policymaker, determine talking about in sgs, it has a statement of purpose, mobilizing mainstream directing capital to green and low current investments. Are we committed to green energy or is it committed to not promoting the energy as chairman claims . We do participate in the other International Groups but based on our own mandate the fed to stop the involvement if you are not going to support the mission . Participating to learn from others your with them or against them. The get involved or get out. The standards agree to United States of america i cant believe this is where we are headed. I found it troubling trying to insert Government Policies to understand the risks. Got following the work handinhand and banks, services to businesses and president obama didnt like. To me this seems like its a chokepoint where regulators are against choosing what industries have double houses a different way of achieving the goal . I would note his department of justice initiatives im in the middle of operation chokepoint, got a copy of an email talking about this joke with her. Our policy is clear and has not changed, properly manage Customer Relationship and mitigate risk. In the category of customers operating on the applicable law and we have processes in place for accountability around our policy and our focus for climate related financial risk and meets the financial needs of the communities. Can send me your written statement. Doctor gibson, related not fully understood measured or modeled, putting forth the idea to monitor the financial risk we cannot monitor how banks manage Interest Rate risk. Our mission is into mature they manage all or material the traditional baking as well as emerging risk financial climate related this. You talk about managing risk getting close, we have a volcano that exploded last week, federal volcanoes to go off. We have spoke to a fire in canada affecting how people are doing living, are you managing that as well . Closer risk it today. Did you foresee those things we have a risk here we think we have, the institute that talks about lane obvious facts, Climate Change is an important thing, the Financial System and my time is up. Im concerned a number of our states for political reasons are cutting themselves off from major Financial Institutions and will end up earning less money on the deposits and costs. You cannot see it return to operation chokepoint and think regulars talk about risk, Reputational Risk of giving Cutting Services they are doing something illegal but theres a risk for a bank account for customer that is unpopular every time we have a democratic administration, gun manufacturer will be able to get a Checking Account and every time a republican administration, planned parenthood will be able to. We want to give that political power nor should we. If your to make gun manufacturers illegal all the way to do it is along congress, not prevent them from having a big. Margaret legislation after a hearing on that legislation there are number of bills listed as part of the hearing that dont have much to do with the topic and that seems to be possible loophole and runaround rules of the committee. I want to agree with the comments on operation chokepoint. Would it make sense to be concerned about things risk if they left all the money to the Fire Insurance company or other similarly situated companies as pirates go up . Any constitution is something you have to manage. If your concentrated on something less risky, is that less of a risk . Take into account the length, it could be a concentration for any. We just went through a process by which banks ignored they would go up and probably would and it felt good to say Interest Rates are going to go up but there is a possibility that they would. Think about the plainness was not fatal. Now have climate risk. Shouldnt find ourselves anymore then we blinded ourselves to inflation and interest going up. We expect anything expected by rising temperatures will become more risky . And emerging risk we dont know enough about so to be able to select that. We also want to look at china risk, theres a significant possibility of a rupture in that trading relationship and borrowers are dependent on the should be shooting so this seems to be the only topic that i hope youre looking at other risks. Judgments time has expired, five minutes for the purpose of asking questions. I would like to continue with the policy analysis that happened earlier this year specifically exercised structures for the involvement of our process. The board design the policy, the board engage insights. This originated with the support of the board so did the board vote in support . The full board of governors did not vote because its purely exploratory. Does not indicate are you saying theres no vote at all . Because of exploratory. The short answer is no, the board did not. No. Which boards have been working on this . By the Federal Reserve trust keeps the other Board Members informed about the progress we are doing in supervision. Other than vice chair, known of the board has been engaged in working with the tsa. Other donors have been informed but work is done by staff. Why was the instruction say the board designed and will engage with these insights . Your drawing a scenario the board separate from all of this get directions tend to indicate the opposite. I think there board of governors the federal agency. I would appreciate to look into that, it needs further explanation the instructions that indicate originating from the board but i hear that is the case so we need to get to the bottom of it. The other uses scenarios using models from the network for the bringing of a Financial System where is the funding for these models come from . Exercise uses a range of scenarios, developed by the input, scenarios used by banks in the Risk Management, designing scenarios for the pilot analysis, easiest to use negros that banks were familiar with. On about the funding publishes snares on the website of the banks use them on the website. You dont know where the funding comes from. To the board formally endorse these . Scenarios are intended to capture a possible range of future outcomes, not forecast for the. I know you have been really prepared, you are skirting around these questions, does the board endorse the models . I dont think weve endorse them but we are using them. My time is running short so in the interest of the chance to come in, i will submit the rest for the record and get back in the chair recognizes mr. Green. I think the witnesses for appearing and i would like to assure the witnesses you are doing the right thing. I want you to have reservation about your usury duty and how you are carrying it out. More than 80 of your investors say Company Seems more openly communicate the risk around esg related factors. They are more likely to invest in the Company Shares with investors to manage these factors. The people want to know whats going on. They want to know whats going on because we had a flood of biblical proportions over trillion gallons of water. We have raging wildfires that rival was created in his mind. Insurance companies leaving florida and california and Major Companies because of climate related issues. You have the fiduciary responsibility, legal required obligation to do what you can to make sure investors are aware of what they are investing in that believe you believe this but agreed that you have this fiduciary responsibility would you extend a hand . If you have the fiduciary responsibly, please extend a hand into the air. Only one person so the rest of you are not fiduciaries, jehovah responsibly to make sure provide for investors . Are mandate relates to adequately wrists. Responsible for this. You believe your responsible for good information about material risk associated, raise your hand please. Nonprofit cooperative not private companies. A fiduciary responsibility for the credit union to ensure they are operating in a safe manner. Your investors other people they are protected . Yes. We have the responsibility to make sure banks are adequately measuring and management risks including climate related financial risk. Panel how different but lets go on around those so the question about disclosures and shareholders to those that you have Supervisory Authority to make sure they are considering this material. Its our response ability to make sure they are managing this property. So you have that responsibility. Yes, we have the responsibly to ensure the institution is supervised and properly identifying emergency. Dating back several years we are using this to understand those institutions. Do you believe you have a responsibility to understand and communicate material risk associated with Climate Change as it relates to your endeavor . I would say it slightly differently, responsibly to make sure things understand the risks they face advantage. Do you believe those that you regulate have the responsibility to understand the risks they have to deal with . If you believe this, raise your hand. I want to capture this picture. [laughter] judgments time has expired. Judgment from tennessee is recognized for five minutes. I want to thank our witnesses for being here today. Gibson, of the justifications vice chair bar has given birth increasing Capital Requirement on u. S. Banks is because the Federal Reserve is implementing this. Do you attend and represent Federal Reserve in meetings and negotiation . I do. Its your position or vice chair bar you take when you go to negotiate on behalf of is agree to buy a vote by the Federal Reserve for . Standards that are discussed on the Federal Reserve, the board votes on proposed under its domestic mandate. Has congress recognized the committee that should have standing to dictate regulatory major impact on the u. S. Economy . I do not Want Congress but we dont implement standards just because they are agreed to. We would go through domestic process following our domestic procedures. I am concerned what has happened is happening, with select few staff can go to the committee and negotiate initiatives that have impacts on the economy and then come back and use it as a rationale of the Capital Requirement. Greenhouse emissions following the closure of Nuclear Power facility. As a member of the network for Financial System what does the fed believe Nuclear Power increases or decreases Financial Sector . Our responsibilities for the climate related Financial Risks are narrow but important. , activist credit thunberg we did top climate scientists warning Climate Change will wipe out all of humanity unless we stop using fossil fuels over the next five years. Its been five years since that announcement. Yes or no, has Climate Change wiped out all of humanity . I have a duty to my constituents and we have seen record floods and fires but safe to say we are all still here after the tragedies that have happened to humankind so the pronouncement obviously was over the top not true and whether or not human activity is affecting, or not remains an area of active interest in something continued to be vigilant and aware of but we also know the history of the world, at least we can surmise from the data we have and we see the planet melt off and be without ice, virtually frozen over, all that went human activity wasnt incurring so one of the hallmarks of human civilization and humankind is weve managed to adapt to changes so while we ought to be careful about what we do, going all the way back centuries, we ought to be mindful, sometimes we dont have proper perspective and incurious your reflection on the question. What would you say has been the experience with Credit Unions that are see the fis and are grant recipients over the last 12 months and is the feedback about the certification process . The process is run by the department of treasury, there difficulties that have been engaged on that because we have an interest in ensuring funds that remain to help their member. The gentleman from how is recognized for five minutes. Thank you for the witnesses for your patience here today. My first question will go to mount treasure, and represent the great deal of banks and Insurance Companies another Financial Institutions as you know provide Financial Services for consumers across the country. Institutions are already taking climate related financial risk by your own words you posted in relationship, they are extreme, emerging, rising wrists could put our institutions at issue. We are still evaluating the situation. Most people learn to understand so with that, they take these factors into consideration because these institutions have been vocal in opposition for republicans led deals that limit the use of climate related factors. Discuss file Financial Firms want to consider risks and why it is good for the bottom line . Thank you for the question. Its about our constituents, they represent constituents back home and at the end of the day the Financial Institutions, including analysis in the Fire District. Lending money to a government entity, their eyes and flooding knowing cost will go up without understanding what i am doing to address those issues. Thats something i am being asked by our Financial Institution credit line for example. I should also be asking the same thing with who i do business with but i should be managing it. Flooding empires did, who were not prepared for that. I want to do that. Can you discuss the impact it would have with the multibilliondollar risk . In our research we determine roughly a third of Credit Unions are located in communities relatively high risk from natural disasters. It is profound with institutions so because of that in the agencies you, Credit Unions notice Community Well patent into the risk that could be material. We can thank you for your next question. Physical and transition risk across locations, race and age due to geographic regions as well as adapting to these risk. Thought process to Climate Change and affect on existing equality. What are your thoughts on this and how is the fed implications of this consideration . Managing material risk asked about it could have broader effects but will be looking at to understand these risks we have a lot to learn about what the impact would be. Thank you, my time is almost up so i go back to you pgh gentle lady yield, mr. Williams is now recognized. The Federal Reserve is establishing a Scenario Analysis exercise, thats a lot of work for a guy from texas which requires banks to major in climate related. Vice chair for supervision like a bar taking the lead on this initiative and claims the exercise will support the boards responsibility is. This is a slippery slope and shows Federal Reserve leading to Higher National debt so a few months ago testifying before the committee, he said the Federal Reserve is not and will not be a climate regulator. Do you believe the Federal Reserve should be or should not be a climate regulator and assist climate Scenario Analysis part of the review for increasing Capital Requirements . I agree the Federal Reserve is not a Climate Policymaker and Pilot Climate scenario wont have any implications for capital, its different from the capital review. The federal received uses their own for climate financial risk. These are policies that should not be decided by independent regulators. These are taken straight out of the Biden Administrations hand to promote policies by banking regulations. Regulators cannot be independent, they regulate by the playbook. A banks board of directors should consider time and policies to risk with policy change and decisions compensation should be made by the board of directors and should not be influenced by any outside parties financial leaders have the obligation to stay independent of political arena in getting involved. You are jeopardizing to the credibility proxies for the Biden Administration climate groups so occ direction of executive order, of associate or Interest Groups insert client base policies and Bank Regulations and the principles to consider compensation Climate Change majors. Focus on the safety of the institutions, we are not focused on social or environmental issues, just ensuring climate related financial risk are identified and properly monitored and controlled. With how they should manage the risk and identify those with expectations. Financial regulators picking winners and losers, we see that constantly. But they are. Transitioning away from energy like oil and gas and credit toward green energies so the International Agencies and Financial Institutions to adopt climate related policies, fixing the all of about approach. One Energy Sector an advantage over the other to mr. Gibson, has the Federal Reserve been facing pressure away from certain Energy Sectors and moving toward green sectors . Its the policy to discourage organization for services to any area. The gentleman feel stuck in the gentleman from illinois is recognized for five minutes. Thank you, mr. Chairman. How to start with a bit of history for the vast majority of human history, 260 parts a million. It started going off during the industrial revolution, 200 years until i was born 1971 after they started. We have ever admitted as a species graduating from college in 1990. Do you agree this is the primary cause of Global Warming . Yes or no . You disagree . And happy to have the silence because last wednesday one of my republican colleagues on the subcommittee, i note the comment was made, i dont think the scientists will. This is obscene. If you have congress who says i dont believe in the laws of gravity, we go out of the way to keep them away. Todays Republican Caucus tonight laws of physics which of the leadership. Let me shift to areas of the jurisdiction, 2021 Oversight Council report on Financial Risks, identify Climate Change as a threat to Financial Stability. You believe the physical transition risks of Climate Change can threaten stability . Knobs across the board. I say that because youre here people criticizing, i think criticisms youre not doing enough. Parts of florida and california and louisiana are no longer in short, we are only going to limit the financial risk to the Banking Sector and staying blind order to structures, i think we need to do much more but thats a longer conversation. You have to responsibly to evaluate all risks . In arizona we are seeing the heat, no doubt. Restricting your choice . Absolutely. Who is bearing the brunt of these costs . Taxpayers, constituent. Firefighters and policemen. I say this with love and respect, their folks who agree. In kentucky board chair that the laws inconsistent with his fiduciary responsibly and duties imposed by law, in indiana the chamber of commerce, the organization said we believe they are anti free market and enterprises, anybody listening. We have concerns the bill could impair our ability to maximize returns for employers. This is real stuff. Thank you. All of us on the side have the privilege of writing laws and debate and get to argue what should be in the laws. Tremendous responsibly and i pinch myself everyday. The power does not extend. The free market economics. We have the ability to ignore them this is go to this account. We have the ability to write a law, make the u. S. No longer attractive and make us the envy of the world. Stop that by ignoring these and opposing free market. It is because we have the power we have the obligation to use it. Have been saying this all month, i really hope once again it is bipartisan competitive markets. Mr. Fitzgerald. September 29, 2022, Pilot Climate Scenario Analysis exercise, manage climate related financial risk, the institution measures relevant Financial Risks and do not need enhancement and help promised by the fed. Im not an accountant but i had a roommate in college who was and he was studying to be an accountant and i remember the basic principles of accounting which was a book about this thick, it was very difficult. Certain things you do when it comes to accounting and certain things you dont, certain things to consider and other things you would never consider. My colleagues reminded me when it comes to esg, there should be some variance in the only the legislature but as a member of congress there certain things want to move forward that are important, we should factor in but it shouldnt change the basic principles of the way the board room works and not only in this committee but other committees i serve on, the focus on esg is because we dont know what the impact would be if we change the rules so the fed stated increased requirements informed capital review in the endgame requirement would be limited long term. Does perceived longterm increased Capital Requirements contemplates climate scenarios into regular climate stress testing. Thats not part of the plan, no. Have different discussions about increasing Capital Requirements over the next several years in doing so and the status testing regime . The climate scenario doesnt have implications for the. January 2023 Federal Reserve research paper, large global think about, change, our paper is closely related by influence 2022. Influence map is a londonbased tank devoted the mission to the corporate Financial Sectors accountable for climate performance. It is a separate agenda from what anybody concerned when it comes to finance. An attempt to use the name shame tactic in the way it is funded by several entities including Climate Works Foundation by several entities including bloomberg philanthropy, Zuckerberg Initiative and the foundation among others, there is an agenda and if we dont look at this clearly, we are all going to fall for this propaganda and move it away from what i said earlier, the foundation of this principle so is the Federal Reserve following outside International Think tanks and advocates, policy change to try to pressure and push Financial Institutions toward Climate Policy direction . The final thing, there is pressure, i have spoken the bows and dfos and sometimes they are unaware their own Corporation Response to this. We had dinner i attended in which i asked the ceo, tell me what you think and he said its something we are involved in or something we talk about but the fact is two days later a staff person came to me and said look at the website. The website had a full two pages on esg so it raises the question in my mind, some of the Corporate Leaders even aware of what is going on even within their own company . I think the answer is no. Gentlemen from institutions now recognized. Thank you to our witnesses for joining us today flooding in the northeast including massachusetts, it is clear time is running out to avoid the worst effects of Climate Change. Witnesses today from agencies, reports you put out years ago sitting climate related financial risk will be more acute if not addressed promptly and while it is encouraging, dear agencies take the risk of Climate Change seriously . Two years later it is discouraging and republicans in congress no they are obstructing efforts to present and mitigate harm to working families and our economy. It is not just a river. The occ mandate focuses on safety and soundness of the Financial System and it comes to Climate Change the bank Risk Management system and this would affect not only bank safety and soundness but overall Financial System so yes or no, in light of this, do you agree occ has the authority and is obligated to address those risks . The occ is obligated to just as we are with any emerging risk. Yes, or no . Thank you. Saw heavy rain and flash flooding in my district and last week in the region in vermont, Financial Institutions, Climate Change causes more physical damage to communities for more Financial Institutions and frontline communities for the same reason. The people who are the most hurt our low income working class families especially when it occurs at a time when they may need Financial Services the most. What steps are taken to ensure Financial Institutions continue to serve communities and climate related Financial Risks flash flooding last week . Our focus is on the large banks over 100 billion in assets and climate related financial in terms of Community Banks, we believe theyve operated decades in the communities and familiar with the impact of the events on the communities and businesses and local clientele. The best knowledge of how to meet the needs of those communities and in addition, the effort to get out the need for unity think is to make sure they are aware of what we are doing for the climate related financial risk. A recent working paper in the European Central think title impact of Global Warming inflation. Without objection. This paper found Climate Change poses risks price stability inflation including hiking up the cost of food. This is the essence of mandate, what steps are taken to better understand implications of Climate Change in the Financial System as a whole. Might area is the provision, i would say the fed conducts research on a range of topics including inflation and other parts of the fed. Regulators must not delay action or plummeted, climate risk for the day, working families bear the brunt and we do need concrete action to avoid further catastrophe, thank you and i yield. The gentleman from South Carolina is now recognized. Its important to highlight how we got here and why they are necessary, will ideology used to be an abstract idea on liberal arts campus but no top mind, many institutions in almost every corner of our society. Will policies have become their Top Priorities committee lanes to Climate Justice and equity and not corporations feel beholden just ask bud light what happens when you get into the loudest voice. As the saying goes, go will, go broke. Nearly two decades and removed from their sale. At least regarding spending hard earned money. Our committees theme, todays hearing is how will ideology and staff are Bank Regulators and the Biden Administration is using this to push Financial Institutions into promoting local land policies. When it comes to will policies, but they cant legislate, they will regulate. The asset purchase policies Climate Change to promote Green Financing a credit from some sectors to others. Those are things they did. Is that something that could or should happen . My area of supervision, youre asking about Monetary Policy, i will have to acknowledge. s are going well for you, i hope we dont start here. We cannot monitor and help Interest Rate risk, the idea you can monitor and help thanks Financial Risks identified are not fully understood, measured or modeled. Do you agree it should focus on its main mission . Our mission is to ensure statements on manage including climate relation. Narrow but important responsibility to shore up the Balance Sheet risk rated by Climate Change. For each of you, do you believe to provide oversight of banks to ensure manage risks and nothing more. In short safety and soundness for emerging risks consistent in this expectation and the banks identified climate risk and the institution. Do you believe that is a narrow responsibility or broad . We are not in the business, our focus is on the institution. What are your thoughts . My thoughts are consistent with our colleagues. You agree the fiduciary obligation of whatever and 50 we are referencing should be first and foremost . We are focused on safety and soundness. What are your thoughts . Focus on safety and soundness in the National Credit union sharing. Thank you. I look back. The gentleman from tennessee is not recognized. Thank you. Almost there. The fed is considered double material. The idea is they consider the Climate Change laws but also the impact on Climate Change such as making loans and activity and it makes him a change in business other Financial Services for greener activities. The supervisory framework, how will this be defined . Has there been instances where green Global Warming factors channel credit away from business sector toward others . Discourage banking organizations with lawabiding businesses so decisions on which customers to deal with. What about guidance for suggested something on the horizon or could be on the horizon . Two we have guidance around safety and soundness and make sure banks manage all of these risks. Think about wildfires in canada and obviously some are going to Global Warming as a calls into the reports, they are not confident some bias may have been lightly, some may be arson and some accidental. My concern is we are looking into defining Global Warming and other he is she climate type of organ, ignoring the fact that this has been going for a while and wildfires have been occurring for a while and in areas where we see devastation, we are building in areas that are already high risk. But climate has changed, just perhaps we are not mention force appropriately so i caution all agencies to not try to achieve an outcome based off natural phenomena that has been occurring. Repair for possible future climate scenarios whether there related to Climate Change, would you agree a relevant risk would be delayed payments from the treasury securities from cyber attack or other diversity . There some sort of cyber attacks, some attack, some sort of, what are the scenarios might you give guidance that you would want to see an addition to the climate risk . We expect banks to be manage all material risk including cyber risks. We are doing a Pilot Climate Scenario Analysis focused specifically on climate related specific risk but also doing work in other areas like cyber risk to enter banks are managing those risks. Now, i guess, you know, one of my concerns that ive had with quite frankly meeting of the alphabet agencies, you know, is as weve seen under this administration and agenda thats permeated the Business Community thats been forced upon them. I would argue the fed has been culpable in that agenda and that you im out of time but i want to thank the panelists for being here. We are almost done, and again tried to i get back. The gentleman from South Carolina mr. Norman is recognized. From wonder i want to thank each of the panelists. Dimension i know forest fires have come up here ms. Benatar you mentioned that. I think one of my colleagues mentioned the problem we have with forest fires particularly california. If you talked to any of the Forest Management team, you know what they say the number one cause outside of lightning and outside of intentional setting fires, number one cause is . I say it daily and it is arson. Whats another . Well, for our fires we do, lightning, arson, and thats been the primary causes of fires. For us is growing significantly due to not addressing deforestation issues and not actually doing medication to control to help stop fire from explain the fe from expanding in our communities. The newport issue, we have a lot of National Areas and federal rights in South Carolina but mentioned the activists, the thatch is two and three feet that they want to let you take up. Which is a tinderbox for an arsonist. My question at one of the hearings was do you believe trees have lives . In other words, beginning and ending. The actives i talked to phil that the force to let the sunlight and the air, they dont believe in that. Or the regulators to captive Insurance Companies because they cant ensure it is ludicrous. How would each, yall are in the regulatory industry for how would yall drink if you had to advise your banks on the risk where would Climate Change rank with, mr. Ogles mentioned cybersecurity, default. How would you rank Climate Change as a risk to the back . Thank you for the question. We dont specifically rank the risks but as noted in our samuel annual risk perspective we do adequate relief to be the most significant risks facing institutions today. We highlighted for those risks including operational compliance, credit and liquidity. And within those risk we highlighted specific things that could impact those risks. How would you if you just had to say, your safety and soundness is your goal to monitor. How would you when you gave them a synopsis of all the risks the banks face, where would Climate Change rank in your opinion . I believe that is dependent upon the institution and is up to the institution to define a climaterelated financial risk could impact financial stabilit stability. So you give no, you have no opinion on should put that top priority, cyber attack, is a liquid default, is a comment that doesnt come into play when you invite a bank on what couldt them out of the safety and soundness . I will tell you according to a Pew Research Center public this year Climate Change right 17 out of 21st on National Issues with the average public. When you hear some of the ludicrous things that are being said al gore say the ocean is monitored he worked himself into a frenzy. I will tell you whats bizarre and in this country have an administration that is best friends and closing up to a china which is i think building coal plants midweek the co2 emissions there are not too good. The issues there baffles me why theyre pushing this so much. Secondly i was a one of the things the Financial Service committee at ive talked to the chairman i think need to do is break down the dollars that are split. Who is that going to . If you can affect a flood, if man can affect the land, if man can affect hurricane, where are these dollars, break it all down like i do but i have to have a realistic project or where is this money going . With that help you all in evaluating risk to see which return on investment is . Okay. I think i get blank stares but i think that would give you some idea when you find out whos doing what, when you find out where the money is going. I think it will tell you a whole lot, and for these who put this risk above everything, not only as a disservice to the shareholders, its disservice to this country. I yield back. Gentleman from california mse minutes. Thank you, chairman. I represent the district in Southern California that is very prone to wildfires because of the bad later management policies from sacramento, droughts and impact of Climate Change. So i share the concern of Climate Change and welcome opportunities to Work Together without raising costs for american firms and punishing Small Businesses with onerous Climate Disclosure requirements. And we understand that is now undertaking the climate Scenario Analysis exercise involving a mandate to six banks supervised by the fed. So is the fed thinking about expanding and extending the Pilot Program beyond the six banks . So the Pilot Climate Scenario Analysis were doing this year only included the six banks, and it will be finished around the end of the year at that it will be concluded. So vice chair bar as indicated the findings of the climate Scenario Analysis would be made public through a report. So does the fed have plans to incorporate some of what you are learning from the climate Scenario Analysis into the mandatory stress test using climate risk modeling . So the supervisory stress test that we do that feeds into banks Capital Requirements separate and distinct from the pilot client Scenario Analysis exercise but so those are Different Things and they dont feed into each other. I want to we should be careful to not venture out into additional mandates without first ensuring that our field supervisors are taking care of the bread and butter issue like interest and Operational Risk. Silicon valley banks failure is a clear case study of the negative outcomes because of the lack of focus on the supervisory framework. Mr. Gibson, how involved were you in conducting this holistic view or holistic review of the capital with vice chair barr . So, so im number of the fed staff worked on projects and briefings for vice chair barr as he was conducting his holistic capital review. Many of us. We holistic review was first announced in 2022 itsy this review would be conducted by fed board. But given the speech from last week it seems only to be reflective of vice chair bars views. Dos five monitor how involved was the rest of the board and undertaking that review and do you foresee including climate risk as part of the holistic review process . Thought the holistic capital review with vice chair barrs review, and it doesnt include the private climate Scenario Analysis that we are talking about here today. Mr. Jones completely move on to talk about some other issue. And National Credit unionthe nan associations request for comment on climaterelated financial risk based on recommendations made by the Financial Stability Oversight Council, or any other Agency Climate working group that the ncua participates in td by treasury or another executive branch agency, is that right . So we did, the board did a request for information in april of this year. The transfer request for vestment asked whether the ncua should modify its examination procedures and supervisor positive relation to the risk. Including modifying ratings. Could you explain what modifications to campbells ratings the ncua has in mind and if it wants to modify supervision and examination procedures to promote environmental regulations . So the ncua board has not spoken to any changes d about 38 questions in the request for information in order to solicit Stakeholder Feedback on their perspective and what opportunities may exist for Credit Unions but there was nothing particular in mind thats been developed or its relative to illicit feedback openly. Okay. Your continued to have a conversation and did you ask a followup question . So there were a variety of questions that were posed really to try to better understand the physical risk and transition risks along with the Business Opportunities for the commentary close on the 26th of june. We have got 44 responded and d we have staff who are going through that right now. Thank you. I yield back. I would like to thank our witnesses for the testimony today for its been iy informative and the testimony wavered certainly sorry to say perpetuates concerns that regulars focus on climaterelated financial risk will, in fact, politicize credit allocation assurances notwithstanding. Dr. Gibson your testimony is very professionally delivered and i appreciate your service. But it climate Scenario Analysis is distinct from the capital framework why are we doing it . We want to know where this is going. Your assurances that your increased focus on climate financial, climaterelated financial risk will not discourage lending by banks to legal businesses certainly looks like to us, some of us, a distinction without a difference because when the regular comes and it says we are really focused on climate within financial risk, that sends a message. Dont claim to carbon e industries. Thats what we are concerned about. And to the extent its not happening now, where is this going . We are going to continue to ask these questions Going Forward and we urge you to heed the admonishment of the chairman of the Federal Reserve, we need to stick to our knitting. Without objection all members will have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witness for the response that i asked him witnesses to please respond as probably as you are able. This hearing is now adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]