Climate Change Weekly # 566— Big Banks No Longer Bound by Federal Climate Accounting Rules
By Sterling Burnett
In another big move against climate alarmism under the Trump administration, quietly on October 16, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency rescinded a set of rules called the “Principles for Climate-Related Financial Risk Management for Large Financial Institutions,” imposed in 2023 under the Biden administration.
The rules required that banks specify and disclose what steps they were taking to account for and manage or mitigate climate-related financial risks to their institutions. The 2023 rules were specifically tailored to force banks with more than $100 billion in assets “to integrate climate considerations into governance, scenario analysis, and risk oversight,” including operations and commercial banking, personal loans, and public bond underwriting. The agencies’ joint statement announcing that the rules were being rescinded said:
The agencies do not believe principles for managing climate-related financial risk are necessary because the agencies’ existing safety and soundness standards require all supervised institutions to have effective risk management commensurate with their size, complexity, and activities. In addition, all supervised institutions are expected to consider and appropriately address all material financial risks and should be resilient to a range of risks, including emerging risks.
The Trump administration, several states, and many Republican lawmakers had objected to the rules arguing that they misdirected banks from focusing on their core functions, such as providing tangible services to people and businesses, and liquidity to the market, at the expense of profitability and reduced returns to shareholder/owners.
“Regulators said the withdrawal reflects a return to long-standing safety and soundness standards that already require banks to manage all material risks—without singling out climate,” wrote The Epoch Times. “Michelle Bowman, the Federal Reserve’s vice chair for supervision, . . . backed the rollback, saying . . . banks should focus on ‘core risks’ such as credit and liquidity rather than speculative long-term climate scenarios, and that the rules could reduce credit supply and raise borrowing costs for American households.
“One likely potential consequence could be to discourage banks from lending and providing financial services to certain industries, forcing them to seek credit outside of the banking system from non-bank lenders,” The Epoch Times reported Bowman saying. “This could result in decreasing or eliminating access to financial services and increasing the cost of credit to these industries. These costs will ultimately be borne by consumers.”
The Epoch Times noted that the action by these agencies was not the first roll back of financial climate regulations by federal agencies. The U.S. Financial Stability Oversight Council, chaired by Treasury Secretary Scott Bessent, disbanded two panels established to analyze climate-related systemic risks for the broader financial sector. Bessent noted that the September action was critical for the agency to redirect its focus to “core financial stability issues,” including bank safety, liquidity risks, and oversight of nonbank financial firms, rather than diverting scarce resources to unknowable and unlikely possible future climate-related harms that financial institutions would be unable to calculate with any degree of accuracy.
