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Changing the climate of financial regulation

14 7 1
20.09.2021

DURHAM, North Carolina – As this year’s brutal summer showed, it has become increasingly easy to track the consequences of climate change.

Just as extreme weather is claiming more and more human lives, more and more species are being lost to extinction. Entire communities have been displaced by savage storms and intolerable temperatures, and rising sea levels and unstable agricultural production threaten to destroy millions of jobs.

These costs are no longer theoretical or far off. They are here now, and though they are being shouldered across the board, the people who feel them most intensely have less access to information, work outdoors, or live in insufficiently protective conditions. Those who cannot easily relocate or afford sufficient property and casualty insurance are increasingly vulnerable.

Despite these growing costs, U.S. financial regulators have yet to show that they are thinking creatively about potential solutions. Their reluctance stands in stark contrast to financial regulators in other rich countries, where policies and processes are being re-imagined to accelerate a rapid, orderly, and just transition to a renewable, biodiverse and sustainable economy.

Institutions like the European Central Bank, the Bank of England, the Bank of Japan and the Bank for International Settlements are actively working to repurpose instruments like stress tests, living wills and risk-based capital standards — all within their existing mandates. They are also pursuing new alliances with local regulators to bridge the regulatory gaps between the financial sector and the shadow banking system.

To be sure, the U.S. financial regulatory structure is complicated, consisting of regulators in a wide range of siloed agencies with discrete statutory mandates. A nonexhaustive list includes the Federal Reserve System, the Securities and Exchange Commission, the Federal Housing Finance Agency, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Consumer........

© The Japan Times


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