Members of Congress Slam Treasury Rule Limiting Climate Risk Policies by Banks

Statement

Senators Sheldon Whitehouse (D-RI), Brian Schatz (D-HI), Sherrod Brown (D-OH), and Jeff Merkley (D-OR) and Representatives Sean Casten (D-IL), Kathy Castor (D-FL), Nydia M. Velázquez (D-NY), Cynthia Axne (D-IA), Bill Foster (D-IL), Madeleine Dean (D-PA), Jared Huffman (D-CA), Steven Lynch (D-MA), and Jesús G. "Chuy" García (D-CA) wrote to the Treasury Department's Office of the Comptroller of Currency (OCC) in opposition to a proposed rule that would serve to limit banks' ability to account for climate-related financial risks. The proposed rule would discourage banks from adopting risk-based policies prohibiting lending to certain lines of business. The lawmakers point out that the rule would make it much more difficult for banks to consider climate-related risks to the oil and gas industry -- risks that experts say put banks and the entire financial system in danger.

"Forcing banks to lend where the risk does not justify it is bad for the health of our financial system. Propping up an industry with falling revenue because its business cannot provide competitive prices is antithetical to the free-market capitalism on which our country thrives. This rule chills banks' ability to properly incorporate climate risk, threatens systemic financial stability, and it is just another example of the Trump Administration's willingness to implement poor policy in order to give handouts to its favored industries," Representative Casten said.

"The economy faces massive, system-wide threats from climate change," said Senator Whitehouse. "We ought to help financial institutions account for climate risks and avoid exposure to dangers like a crash in fossil fuel asset values. Instead, this proposal would make it much easier for lenders to ignore blaring economic alarm bells and continue funneling money into risky fossil fuel investments. It's plain stupid."

"This proposed rule directly undermines the OCC's responsibility to ensure a safe and sound banking sector. It is extremely troubling that a federal regulator is using its supervisory authority to pressure banks to finance projects the banks themselves have deemed too risky," said Senator Schatz. "When it comes to banks' decision-making, risk is risk--and climate change poses systemic threats to our financial system and economy. Rather than pressuring banks to lend to risky businesses, the OCC should be using its supervisory authority to require banks to better account for climate risks."

"Americans know that climate change is real; it's hurting their lives right now, and they demand action," said Senator Brown, ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. "Climate change puts our lives and our economy at risk and dealing with this existential crisis must be a priority for us all. This proposal does the opposite by forcing banks to prop up companies that push yesterday's technologies and power sources."

"Banks and financial institutions understand the growing financial threats and risks posed by the climate crisis," said Representative Castor, Chair of the House Select Committee on the Climate Crisis. "They are already taking real steps to protect small businesses and investors from financially risky investments. The OCC's rule would tie their hands, forcing banks to invest in projects that will hurt the pocketbooks of Americans and put our national economy at risk. This is another short-sighted move by the Trump administration, which has always cared more about the short-term profits of polluters than the long-term prosperity of the American worker."

As the members point out, a chorus of economists, central bankers, financial regulators, asset managers, investors, insurance analysts, credit rating analysts, investment bankers, real estate professionals, and scientists warn that climate change and the failure to plan for an orderly transition to a low-carbon economy are capable of destabilizing the financial system and threatening significant economic losses. This sudden destabilization would put our economy in significant danger.

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