Senate Dems Ask NCUA to Adopt Guidance on Climate Risks

Senate Banking Chairman Sherrod Brown, D-Ohio, and ten of his Democratic colleagues are asking financial regulators, including the National Credit Union Administration, to adopt specific guidance dealing with the threat of climate change.

“Climate change poses a threat to financial institutions across the country,” the senators, led by Sen. Jack Reed, D-R.I., wrote in a letter to the regulators last week. “No institution is immune.”

The request puts Chairman Todd Harper, a Democrat, in a bind, since it is unlikely that he would have the support of the two Republican members of the board to adopt a strong climate statement.

The senators point out that the Financial Stability Oversight Council recently adopted a series of recommendations dealing with climate change.

One of FSOC’s recommendations directs member agencies to evaluate whether “guidance specific to climate-related risks is necessary to clarify expectations for regulated or supervised institutions.” 

The senators said that existing guidance is inadequate, adding that federal regulators should explicitly incorporate climate-related financial risk into risk management expectations.

They said that adopting guidance would ensure that financial institutions pay greater attention to climate risks before they pose a safety and soundness problem. They added that examiner expectations would become clear and transparent, and that written guidance would keep pace with state regulators and central banks in other nations.

NCUA is an FSOC member and Harper voted for the report and its recommendations. However, the two Republican board members have been less inclined to take a strong position addressing the issue. The agency’s Strategic Plan was delayed for months, and sources have said the delay was caused by a lack of consensus on the issue.

The Strategic Plan was presented at last month’s board meeting. The plan did not provide specific ways the NCUA will address climate change. “Credit unions need to consider climate-related financial risks and how they could affect their membership and institutional performance,” the plan says. It states that the agency will need to adapt its risk monitoring framework to account for climate-related threats to the credit union system.

During that meeting, Republican board member Rodney Hood said that while climate change is an issue, he does not believe it is a safety and soundness issue that the NCUA must address. He said credit unions should be able to deal with the risk.

Related:

NCUA Board Strikes Deal on Service Facility Rule, Climate Change

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