What Should Bank Supervisors Do About Climate Risks?

Mark E. Levonian | 4 June 2024
Monetary, Policy Briefs | Tags: Central Banks, Climate Risks, Financial Supervision, Governing Finance

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This paper considers the role of bank supervisory authorities with respect to climate change. The emerging consensus is that financial supervisors and regulators must address climate-related risks to banks and other financial institutions. The paper discusses potentially productive avenues for doing that in the near term. It suggests that the role of regulatory capital requirements, while important, merits less attention than other aspects of regulation and supervision. In particular, it argues that a supervisory (as opposed to regulatory) process guided by clear principles for sound risk management and including scenario analysis is an effective route for the near term. Such an approach, leveraging the supervision process and emphasizing risk management, can be pursued within the current mandates of most authorities around the world. With regard to the critical challenge of data, the paper suggests that while disclosure is important, information needs for management of climate-related risks are broader, and financial supervisors can and should be taking various steps to support the collection of better data and the development of supporting technology and other infrastructure to effectively use that data in risk management.

Monetary Policy and Climate Change – Distinguishing Between a Protective and a Proactive Agenda

Timothy Lane | 4 June 2024
Monetary, Policy Briefs | Tags: Central Banks, Climate Risks, Governing Finance
Central banks in many economies are striving to take account of climate change in their policies and operations. In this context, the important distinction between a protective agenda versus a... continue reading

Aligning Sovereign Bond Markets with the Net Zero Transition: Key Findings and Debate

29 April 2024 | Online | Co-hosted with GRI-LSE
Monetary, Panel | Tags: Central Banks, Climate Risks, Debt, Financial Supervision
To celebrate the launch of a flagship policy report discussing the role of central banks in aligning sovereign bond markets with the net zero transition, the Grantham Research Institute at... continue reading

Climate-Related Systemic Risks and Macroprudential Policy

Paul Hiebert and Pierre Monnin | 9 August 2023
Monetary, Policy Briefs | Tags: Climate Risks, Financial Stability, Financial Supervision, Macroprudential Policy, Systemic Risks
Central banks and financial supervisors must rapidly develop sound risk management practices adapted to a context in which policy decisions rely on imperfect data and high uncertainty.... continue reading

Governing Finance and Climate Change – The Role of Central Banks and Financial Supervisors in Addressing Climate-Related Financial Risks

13 April 2023 | Washington, D.C., United States
Monetary, Panel | Tags: Central Banks, Climate Risks, Financial Supervision
The Institute for International Economic Policy (IIEP) at GWU, in partnership with the Council on Economic Policies, recently hosted a morning event on Governing Finance and Climate Change in Washington.... continue reading

Is the Current Macroprudential Framework Fit for Climate Systemic Risk?

Pierre Monnin | 13 November 2022
Monetary, Blog | Tags: Central Banks, Climate Risks, Financial Stability, Macroprudential Policy, Systemic Risks
Climate change and the transition to a low-carbon economy have a clear systemic dimension, and they potentially pose a systemic risk for the financial sector. This has been highlighted by... continue reading

Mark E. Levonian

Mark E. Levonian was most recently Managing Director at Promontory Financial Group, and formerly Senior Deputy Comptroller for Economics at the US Office of the Comptroller of the Currency (OCC). At the OCC, he oversaw quantitative examination activities and policy research and was closely involved in responses to the global financial crisis, including the development of bank stress testing. As a senior regulatory official and economist, he led or participated in various Basel Committee initiatives related to economic modeling and bank capital adequacy. Prior to the OCC, Mark was Vice President at the Federal Reserve Bank of San Francisco, head of Banking Studies at the New York Fed, Lecturer in Finance at the University of California, and Senior Economist at the Reserve Bank of Australia. He has been an adviser/consultant to the World Bank, the IMF, and various central banks.