Addressing Climate-Related Financial Risk Through Bank Capital Requirements

May 1, 2021Published by Center for American Progress

Regulators should use the bank capital framework to improve the resiliency of the financial system against climate-related risks, according to this paper from the Center for American Progress.

The capital framework is one of the most powerful tools in financial regulators’ arsenal, and should be at the heart of efforts to improve the resilience of the financial system to climate-related risks, the report goes on to say.

The paper advances a strategy for integrating climate risk into the capital framework, which it says combines vigorous and proactive action in the short term, while acknowledging that some additional valuable but more intricate policies may take longer to develop and implement.

The authors contend that the measures proposed in the report can all be implemented under existing statutory authority, as Congress has granted the banking regulators broad discretion to develop capital standards they deem appropriate.

This page was last updated October 22, 2021

Share this article