Regulators toss out rules requiring banks to prepare for climate change
Michelle Bowman, vice president for supervision of the U.S. Federal Reserve, during the Federal Reserve Board Community Bank Conference on Thursday, October 9, 2025 in Washington, DC, United States.
Eric Lee | Bloomberg | Getty Images
Regulators are eliminating controversial rules that required banks to plan for losses in the event of climate-related events, they announced Thursday.
A joint statement from the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Federal Reserve said they no longer believe the requirements are necessary because they are redundant with other provisions banks make to plan for emergencies and unusual events.
“Institutions do not believe that principles for managing climate-related financial risk are necessary because institutions’ current safety and soundness standards require all regulated institutions to have effective risk management commensurate with their size, complexity and activities,” a joint statement from the three regulators said. The statement was included.
Fed Governor Michael Barr, former vice chairman of oversight, made a statement disagreeing with this move.
“Rescinding the guidelines is shortsighted and will make the financial system riskier even as climate-related financial risks increase,” Barr said in a statement. he said.
Mission creep
Trump administration officials have criticized the Fed for falling victim to mission drift or exceeding the scope of its monetary policy and bank supervision powers. The climate change provisions created in October 2023 were a point of criticism.
Chairman Jerome Powell has repeatedly stated that climate is not directly the Fed’s concern. The rules required banks to list potential losses they could face from climate-related issues as part of routine testing.
Governor Michelle Bowman, who replaced Barr as Fed banking supervisor, praised the repeal of the rules as part of an attempt to “refocus the oversight process on material financial risk.”
“Rescinding the climate guidelines is an important step in this process,” Bowman said. “The effect of this guidance is to create confusion about supervisory expectations and increase the cost and burden of compliance without a commensurate improvement in the safety and soundness of financial institutions or the financial stability of the United States,” he said, criticizing the climate rules.
While Bowman acknowledged the risks posed by climate change, he said the Fed’s mission “does not include making climate policy.”
