US Regulators End Climate Oversight Framework For Big Banks

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

Federal regulators will no longer require banks to spell out how they manage climate-related financial risk, following objections from officials in the Trump administration and Republican lawmakers, who said that climate policy was distorting financial regulation.

In a joint move announced on Oct. 16, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency rescinded a set of rules called the Principles for Climate-Related Financial Risk Management for Large Financial Institutions.

Introduced in 2023, the rules applied to banks with more than $100 billion in assets and were intended to incentivize institutions to integrate climate considerations into governance, scenario analysis, and risk oversight.

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.

“The agencies do not believe principles for managing climate-related financial risk are necessary,” the notice stated, while a Federal Reserve memo further clarified that such guidance risked distracting banks from focusing on core vulnerabilities such as credit, liquidity, and operational risk.

“Existing safety and soundness standards require large financial institutions to have effective risk management processes commensurate with the size, complexity and risk of their activities,” the memo stated, adding that existing rules and guidelines “are sufficient to help ensure financial institutions are managing all material risks.”

Fed Governor Christopher Waller welcomed the move with a two-word statement: “Good riddance.”

Michelle Bowman, the Federal Reserve’s vice chair for supervision, also backed the rollback, saying in a statement that the climate framework had created “confusion about supervisory expectations” and imposed compliance costs and burdens without improving financial stability. She said 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,” Bowman said. “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.”

But the decision drew dissent from several other Fed officials. Federal Reserve Governor Michael Barr called the rescission “short-sighted” and said it would “make the financial system riskier even as climate-related financial risks grow.” He pointed to recent disasters such as Hurricane Helene and the California wildfires as evidence of mounting financial exposure.

“The rescission contains literally no evidence to support taking this step only two years after putting the principles into effect,” Barr said. “We owe the public a rational, evidence-based explanation for our actions, and this rescission fails that test.”

Federal Reserve Governor Lisa Cook, while accepting the board’s decision and noting the benefit of regulations that are clear and predictable, said that she expects banks to remain vigilant in assessing severe weather risks.

“My view has not changed since 2023: to the extent severe weather events could cause disruptions to specific firms or to the financial system, I would expect that large banks would seek to be proactive in monitoring, assessing, and appropriately addressing such risks,” Cook said. “I also believe it is advantageous for the banking industry to have stable, well-understood supervisory expectations.”

The rollback marks a broader effort by the Trump administration to unwind climate-related directives across financial agencies and limit the role of environmental, social, and governance factors in regulatory supervision.

That shift has extended beyond the banking regulators. In September, the U.S. Financial Stability Oversight Council, chaired by Treasury Secretary Scott Bessent, voted to disband two panels dedicated to analyzing climate-related systemic risks. Bessent said the decision was a necessary refocus on “core financial stability issues,” including bank safety, liquidity risks, and oversight of nonbank financial firms.

Climate advocates called the move a setback for efforts to prepare the financial system for extreme weather disruptions.