Fed’s Pilot Program for Climate-Related Stress Tests—Six-Month Deadline for Six Bank Participants

Participants in the Federal Reserve’s climate stress test pilot program—Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo—have received instructions on how the program will be conducted and what information will be gathered. The exercise, which follows the Fed’s September 30 announcement, will run until the July 31. The pilot program takes a two-prong approach, the first of which addresses the impact of physical risk—floods, wildfires, hurricanes—on assets in their commercial and residential real estate portfolios. The second part will consider the impact of two transition risk-based scenarios—one with current policies and another based on a 2050 net-zero greenhouse gas emissions scenario—on the banks’ corporate loan and commercial real estate portfolios. The Fed’s stated goal is to supervise and help banks ‘analyze and manage emerging climate-related financial risks.’  Read more.