Treasury may be able to facilitate weather stress tests on financial firms
WASHINGTON – The US Treasury may be able to facilitate weather stress tests on US banks and insurers, Treasury Secretary Janet Yellen said on Monday, although the tests would likely not impose capital requirements or limit dividend payments like existing stress tests do.
Ms Yellen, speaking at the New York Times DealBook conference, said the tests would be carried out by the Federal Reserve and other financial regulators, not the Treasury. But she said the Treasury, which helps shape regulatory policy toward U.S. financial companies, may be able to facilitate testing.
“I think it is not envisioned that this will have the same status in terms of limiting payments and capital requirements,” she said, referring to the annual bank stress tests that the Federal Reserve conducts. already. “But I think they would be very revealing both for regulators and for companies themselves in terms of managing their own risk.”
Ms Yellen said she intended to create a center within the Treasury to examine tax incentives and financial stability risks associated with climate change and appoint a senior official to conduct the review.
Climate change and the economy
Regulators around the world have warned against the dangers climate change poses to the financial system, including the risk of more severe weather events such as floods or forest fires that threaten the physical assets that underpin bank loans. The activities of banks may also be altered as countries reduce their dependence on fossil fuels, including the more widespread use of electric vehicles and the shift to renewable energy resources.
When asked if companies can take action on their own to deal with such risks or if regulation is needed, Ms Yellen said: “It certainly requires policy.”
She stressed that other countries have started to take steps to implement climate stress tests of financial firms and said she was encouraged that the Fed has indicated that it is also exploring the possibility.
“I think this is something that at Treasury maybe we can discuss and facilitate in the United States,” she said.
When asked separately about Bitcoin, Ms Yellen reiterated her previous comments that it was a highly speculative asset that can be extremely volatile, and said she was concerned about potential losses for investors.
“I don’t think Bitcoin … is widely used as a transaction mechanism,” she said. “As far as it is used, I fear that it is often for illicit financing.”
She added: “It is an extremely inefficient way to transact and the amount of energy consumed to process these transactions is staggering. ”
Write to Kate Davidson at [email protected]
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