US pushes financial regulators to backtrack on climate risk project
Effort to weaken Basel committee task force comes as Trump administration steps back from environmental issues
US regulators are calling on the world’s financial rulemakers to downgrade a flagship project to tackle the risks of climate change in the latest sign of America’s retreat from environmental causes since Donald Trump became president.
Top officials at US financial watchdogs are seeking to weaken the power of a high-level task force set up in 2020 to examine climate change risks to the financial system by the Basel Committee on Banking Supervision, the standard-setter for global financial regulation.
The proposal to dilute the Basel committee’s task force is on the agenda for a meeting of the world’s top central bank governors and financial supervisors on Monday, according to three people briefed on the matter.
The move comes as the Trump administration has taken steps to force all arms of the US government, along with international bodies such as the World Bank and IMF, to ditch their focus on climate-related issues.
The four US regulators on the Basel committee — the Fed, the New York Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation — are calling for the task force to be downgraded to a working group, according to two of the people briefed on the matter.
Some central bankers at the meeting are likely to argue against the US-backed proposal, according to one person familiar with Monday’s meeting. “It is not clear if there is enough support to pass it,” said the person.
Europe-based regulators are likely to be among those defending the task force after both the European Central Bank and the Bank of England recently called on the banks they supervise to step up their efforts to address climate risks.
The project is co-chaired by Kevin Stiroh, a senior New York Fed official currently seconded to the Fed board in Washington and who leads its climate supervision committee, and Frank Elderson, an executive board member at the European Central Bank.
Since being set up five years ago, the body has produced a number of reports, including proposals to establish a global framework for banks to disclose climate risks and a set of principles for banks and their supervisors to tackle threats from global warming.
If the Basel committee dilutes the importance of its flagship climate project it is likely to prompt uproar among environmental groups.
“It’s the wrong move at the worst possible time,” said Benoît Lallemand, secretary-general of the lobby group Finance Watch.
“Disbanding the Basel committee’s climate task force would send the absurd signal that climate risks are no longer a concern for financial stability, just as extreme weather, credit losses and asset repricing accelerate,” he added. “This regressive decision would undermine the credibility of the BCBS and its role as a standard-setter.”
In January, the Fed left the Network for Greening the Financial System, a central banking club for researching climate risks that is housed by the Banque de France. Jay Powell, Fed chair, denied at the time that the decision reflected the Trump administration’s stance on climate issues, saying it was “really not driven by politics”.
Kevin Warsh, seen as one of the frontrunners to replace Powell once his term as Fed chair ends in May 2026, last month attacked the US central bank’s involvement in issues such as climate change and inclusion — though he acknowledged it had now “changed its tune” by leaving the NGFS in January.
Asked this week whether the Fed should focus on climate change, Powell distanced himself from the subject, saying its “role on climate is a very, very narrow one”.
“It’s a real danger for us to try to take on a mandate like that, which [has a] very narrow application to our work,” the Fed chair said. “If you go for things that are really not in your mandate . . . then why are you independent?”
The Basel committee, the Fed, the OCC, the FDIC and the New York Fed declined to comment on Monday’s meeting.
The Fed has also come under pressure from US banks over its so-called Basel III endgame proposals for banking capital requirements, based on rules global regulators agreed at the Basel committee a decade ago.
US lenders believed the original proposals were too draconian and threatened to sue the Fed, prompting it to drop them. Michael Barr, the Fed’s vice-chair for banking supervision, has since quit that role while remaining on its board. Barr has recently been replaced by Michelle Bowman, who is expected to release less stringent guidelines soon.
