Is Raskin in pole position for Fed’s supervision vice chair?

November 30, 2021|Written by Graham Caswell|Federal Reserve

Former deputy secretary of the Treasury Sarah Bloom Raskin has been tipped as a potential candidate for the role of vice chair for supervision, one of three vacant positions on the Fed’s board expected to be filled by President Joe Biden before the end of the year. Raskin, a strong advocate for a precautionary approach to climate risk, is seen as the preferred candidate among US climate campaigners who were disappointed at Biden’s recent renomination of Fed chair Jerome Powell.

The Fed lags far behind other central banks in recognising the risks of climate change to financial stability and dropped several places in last month’s update to the Green Central Banking Scorecard, largely as a result of weak financial policy. With US banks facing a US$22tn “carbon time bomb” of high-emission investments vulnerable to depreciation and stranding, effective prudential supervision of climate risk is becoming increasingly urgent.

The vice chair for supervision is responsible for developing policy recommendations on overseeing and regulating US depository institutions, holding companies and other financial institutions, and is one of two vice chairs on the Fed’s board. The position was founded by the Dodd–Frank Act in 2010 and first filled in 2017. Biden appointed governor Lael Brainard to fill the second vice chair position when he renominated Powell.

Raskin’s qualifications for the supervisory position are formidable. In addition to being a former member of the governing board at the Fed, Maryland commissioner of financial regulation, and managing director of the Promontory Financial Group. She is currently a Rubenstein Fellow at Duke University where she leads research on regulation and resilience in financial markets. Raskin also has considerable climate expertise, teaching courses on climate change and financial markets and speaking widely on the climate crisis.

As central banks call for increased international cooperation in addressing climate risk, Raskin is also well placed to work with supervisory counterparts such as the European Central Bank’s Frank Elderson and the Bank of England’s Sarah Breeden. Both of these banks have accelerated work on mitigating climate-related threats to financial stability, including considering climate capital requirements recently proposed by the global Basel Committee on Banking Supervision.

“Our collective well-being is at risk from serious disruption from climate change,” Raskin told the Green Swan conference earlier this year. Market forces are not equipped to manage the transition away from carbon, she said, pointing to the radical uncertainty and vast scale of the climate threat as reasons for the adoption of a precautionary approach from central banks and financial supervisors.

This page was last updated November 30, 2021

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