(Adds further Waller comment in paragraph 4)
By Howard Schneider
WASHINGTON, May 11 (Reuters) - Climate change does not
pose such "significantly unique or material" financial stability
risks that the Federal Reserve should treat it separately in its
supervision of the financial system, Fed Governor Christopher
Waller said on Thursday in a detailed rebuttal of demands for
climate initiatives by the U.S. central bank.
"Climate change is real, but I do not believe it poses a
serious risk to the safety and soundness of large banks or the
financial stability of the United States," Waller told an
economic conference in Spain. "Risks are risks ... My job is to
make sure that the financial system is resilient to a range of
risks. And I believe risks posed by climate change are not
sufficiently unique or material to merit special treatment."
The aim of Fed oversight and stress tests of bank balance
sheets, he said, was "general resiliency, recognizing that we
can't predict, prioritize, and tailor specific policy around
each and every shock that could occur."
"In March we watched a bank run on Silicon Valley Bank" that
heightened attention to the levels of uninsured deposits at some
institutions, Waller said. "Those are the kinds of things I am
staring at right now. I am not as worried about climate as I am
about things like banks failing because of bank runs."
The Fed has in general taken a more conservative attitude
towards its responsibility for climate issues than its
counterparts in Europe, with Fed Chair Jerome Powell saying the
U.S. central bank was not a climate policymaker and would not
steer capital or investment away from the fossil fuel industry,
for example.
The Fed is considering development of a set of "proposed
principles" for large banking organizations to manage
climate-related financial risks, an idea Waller opposed late
last year.
In his remarks on Thursday, Waller said science had
"rigorously established" the climate is changing. But in
assessing financial stability, U.S. central bankers needed to
ask only if those changes would have a "near-term" impact, with
potential losses large enough to affect the macroeconomy, he
said.
Waller argued they won't, noting that banks are already
adept at hedging against weather-related losses, while more
slow-moving changes - to coastal residential patterns as sea
levels rise, for example - were analogous to population losses
seen over the decades in cities like Detroit, locally important,
but not systematically so.
So-called "transition risks" to a lower-carbon economy,
meanwhile, "are generally neither near-term nor likely to be
material given their slow-moving nature and the ability of
economic agents to price transition costs ... There seems to be
a consensus that orderly transitions will not pose a risk to
financial stability," he said.
(Reporting by Howard Schneider; Editing by Paul Simao)
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