American banks face challenges in predicting the impact of climate change on their loan books due to data and modeling difficulties, according to a Federal Reserve climate scenario analysis.
Reports It aimed to predict how banks would be able to manage climate change risks such as natural disasters and changing policies, noting that many lenders would rely on third-party providers to fill data gaps.
The analysis was conducted in 2023 with participating banks: Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.
Climate-related financial risks could cost trillions of dollars in assets and threaten the stability of banks.
Accordingly ReutersUS Federal Reserve Chairman Jerome Powell explained that the policy would not be used to set climate targets, but rather to manage risks to the banking system.
