This bill addresses climate change risk and its potential impact on the financial system.
The Federal Reserve Board must develop financial risk analyses relating to climate change for certain large nonbank financial companies and bank holding companies. Specifically, these entities must be evaluated every two years on whether they have the capital necessary to absorb financial losses that would arise under several different climate change risk scenarios. In response to the results of the evaluation, entities must develop and submit for approval a climate risk resolution plan. The plan must include a capital policy with respect to climate risk planning and targets to remedy identified vulnerabilities. If the plan is not approved, the entity’s ability to make capital distributions is restricted.
The bill also establishes the Climate Risk Scenario Technical Development Group to provide recommendations to the board regarding climate change risk scenarios, and determine the financial and economic risks of these scenarios.
The board must develop a survey to assess (1) the ability of other large financial institutions to withstand each scenario, (2) which surveyed entities have activities in geographical areas or industries that are significantly exposed to the impacts of climate change, and (3) how these surveyed entities plan to adapt to risks presented in each scenario.