​Green financial system cooperation urged by European, French central bankers

3 May 2019 7:01pm

30 April 2019. By Neil Roland.

European and French central bankers called for global cooperation on making the financial system resilient to climate change at a meeting of a green-conscious bank regulators group — of which the US Federal Reserve isn’t a member.

A UK official made a similar plea at a different forum.

“We can already hear distant thunder, but we must not wait for the storm to hit,” said Sarah Breeden, who oversees the Bank of England’s responses to climate-related risks.

“We need to work together internationally and domestically, private sector and public sector, to achieve a smooth and orderly transition,” she added at a London conference*: “All hands on deck”.

— 'International cooperation' —

Meanwhile in Paris, Sabine Lautenschlager, an executive board member at the European Central Bank, called for a common set of international expectations about how banks should deal with climate change.

“The challenges we face with regard to climate change can only be successfully solved if all stakeholders accept responsibility,” she told a Network for Greening the Financial System meeting.**

Lautenschlager also urged global cooperation on common definitions, taxonomies, data and metrics to gauge the impact of climate risks.

At the same conference, Francois Villeroy de Galhau, governor of the Bank of France, called for design of comprehensive climate stress tests “to properly size the financial effects of climate change.”

She added: “There will be winners and losers internationally but also within countries. This calls for a deeper international cooperation which will promote a globally fair transition to a low-carbon economy”.

The speeches from the European, UK and French central bankers were posted by the Bank for International Settlements on Monday and Tuesday.

— International group —

The Network for Greening the Financial System, created in December 2017, is a 34-member group of central banks and financial regulators from countries that include Japan, Germany, China, Singapore, Canada and Mexico, as well as France and England.

It recommended in its first report, in April, that central banks integrate climate-related risks into financial stability monitoring and bank supervision.

Bank of England Governor Mark Carney said at the Paris forum the US would be “very welcome” to join the global network. A Fed spokesman declined to say today why the central bank hasn’t joined the Network for Greening the Financial System.

— Powell under pressure —

Fed Governor Jerome Powell was asked at a Senate hearing in February whether he was doing enough to respond to climate change risks.

“I think we’re open, we’re clear-eyed about the nature of coastal risks and natural disaster risks and that kind of thing, but it’s a fair question, and you know we’ll go back and look at it again.”

Twenty senators have urged Powell, as well as heads of the US Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, to join with other nations to ensure the financial system’s resilience to climate change.

“We have seen no evidence that your agencies have seriously considered the financial risks of climate change or incorporated those risks into your supervision of financial institutions,” the senators wrote earlier this year.