The House Financial Services Subcommittee on Financial Institutions and Monetary Policy on July 20 conducted the hearing "Climate-Risk: Are Financial Regulators Politically Independent?" Republican legislators introduced four bills intended to limit federal regulators' ability to connect climate change to financial security.
Rep. Andy Barr (R-Ky.), Barr criticized the regulators' claim of "helping" banks manage uncertain risks, noting that climate models are complex and subject to numerous uncertainties, according to a press release of his opening remarks. “Federal regulators represented here today have recently coordinated to promulgate principles for managing climate-related financial risks," Barr said in his remarks, according to the release.
During the hearing, Barr expressed his concerns about the recent coordination among federal regulators in developing principles for managing climate-related financial risks. He acknowledged the guidance and information requested by the regulators were in line with a 2021 Executive Order, efforts endorsed by Financial Stability Oversight Council (FSOC) Chair Janet Yellen, and recommendations from various international global governance organizations.
“FSOC Chair Yellen has repeatedly identified climate change as an existential crisis and has called climate change ‘an emerging and increasing threat to financial stability'," Barr said in his opening remarks, the release states.
Barr criticized the Federal Reserve's involvement in this matter, which includes the implementation of mandatory supervisory climate scenario analysis and formal collaboration with the Treasury's Office of Financial Research on climate data and analysis.
"The Federal Reserve is extending furthest with a mandatory supervisory climate scenario analysis and formal collaboration with Treasury’s Office of Financial Research on climate data and analysis," Barr said, according to the release, "which the Board of Governors never voted to approve.
Barr stated there is inadequate transparency on climate efforts by regulators or on what transpires in climate working groups and international governance organizations led by the Biden administration.
Four bills were introduced during the hearing to address these transparency and regulatory capture concerns. The "Stop Executive Capture of Banking Regulators Act" aims to require Federal banking regulators to report on the implementation of recommendations from the FSOC Chairperson and Executive Order. The "Ensuring U.S. Authority over U.S. Banking Regulations Act" proposes additional requirements for Federal banking agencies when undertaking rulemakings based on policies of non-governmental international organizations, and mandates reporting on certain covered international organizations. The "Banking Regulator International Reporting Act" intends to make it compulsory for Federal banking agencies to report on their interactions with non-governmental international organizations.The "Restoring the Federal Reserve Board Act" seeks to amend the Federal Reserve Act by removing the designation of the "Vice Chairman for Supervision" from one of the members of the Board of Governors of the Federal Reserve System.
"There is nothing wrong with regulators wanting to learn more about data, methods, and analysis or to ask questions of banks about what they are doing," Barr said during the hearing, according to the release. He claimed many large institutions are already analyzing climate-related financial risks and providing public information about how they manage such risks, the release reports. Barr expressed skepticism about the sudden need for regulators' coordinated public-facing campaign of guiding principles for climate risks, especially considering the manageable nature of these risks according to research.
"There are so many degrees of freedom available to climate analysts that, like cooking soup with a cabinet full of spices, you can get whatever flavor of results that you'd like," Barr said in the release.