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Agency representative testifies at House hearing on financial regulators’ political independence.
Credit unions—and not the NCUA—are best positioned to assess the risks climate change poses to financial institutions, but the agency should provide tools to help them do so, Rendell Jones, the agency’s deputy executive director, told a House subcommittee Tuesday.
“The NCUA should analyze all potential material risks to credit union performance and develop tools or resources to help credit unions measure, monitor, and mitigate climate-related financial risks,” Jones told the House Financial Services Committee’s Financial Institutions and Monetary Policy Subcommittee, in his testimony.
The hearing was called by subcommittee Republicans to question financial regulators about their work on Environmental, Social and Governance issues.
Testimonies From the Hearing
Republican Stance
Subcommittee Chairman Rep. Andy Barr, R-Ky., charged that the financial regulators are politically captured by the Biden Administration, alleging they have given up their independence. And Barr challenged the agencies’ work on developing models to test the impact of climate change on the safety and soundness of financial institutions.
“On climate policy, driven by Biden administration directives, regulators are choosing politicized policymaking, putting their independence at risk, and giving in to the temptation to exaggerate our understanding of climate change,” he stated.
Democratic Pushback
However, Rep. Bill Foster, D-Ill., the subcommittee ranking Democrat, said that agencies are “appropriately responding.”
He added that the hearing was called “to encourage regulators to bury their heads in the sand.”
NCUA Position
In his testimony, Jones said credit unions must continue to adapt to account for climate-related financial risks, adding that the NCUA “must evolve its understanding” of the impact of those risks.
He noted that an analysis performed by the NCUA showed that about one-quarter of federally insured credit unions—accounting for one-third of system-wide assets—are headquartered in communities particularly vulnerable to natural disasters.
Federal Reserve Input
Michael Gibson, director of supervision and regulation at the Federal Reserve, said his agency is working with the Office of the Comptroller of the Currency (OCC) and the FDIC to establish principles-based guidance for banks with assets of more than $100 billion.
“Climate scenario analysis—in which the resilience of financial institutions is reviewed under different climate scenarios—is an emerging risk-management and supervisory tool used to evaluate climate-related financial risks,” he said.
He added, “It is not and never has been the Federal Reserve’s policy to discourage banks from offering accounts or services to any class or type of law-abiding business, and this is not a part of our work looking into climate-related financial risk.”
OCC Focus
The OCC also will not tell bankers about what customers or legal businesses they may or may not serve, Greg Coleman, the agency’s senior deputy comptroller for large bank supervision, told the subcommittee.
“The OCC’s focus on and supervision of climate-related financial risk is firmly rooted in our mandate to ensure that national banks and federal savings associations operate in a safe and sound manner,” he said.
Letter From Credit Union Group
In advance of the hearing, Brad Thaler, NAFCU’s vice president of legislative affairs, sent the panel a letter, saying that there should be congressional action before regulators issue compliance reporting standards for climate-related financial risks.
He explained that NAFCU favors having the Financial Stability Oversight Council develop guidance for all financial regulators to ensure that credit unions are not unfairly burdened compared to other financial institutions.
“Moreover, financial institutions need to determine the risks for themselves with their management and boards of directors as they vary between geographic location and levels of physical risk exposure,” Thaler wrote.
NCUA
