Growing risk of climate change for deposit insurers highlighted by Gruenberg before international group

Climate change as a continuing and growing source of risk for deposit insurers was highlighted before a conference of deposit insurers in Argentina Thursday by the acting chairman of the federal bank deposit insurance agency board.

The experiences shared by deposit insurers from the global financial crisis and the COVID-19 pandemic “remind us that the future we prepare for will include new and difference sources of risk with the potential for profound impacts on the economy and financial system,” Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corp. (FDIC) Board, said in prepared remarks for the 21st Annual Conference of the International Association of Deposit Insurers (IADI).

“There is broad consensus, both domestically and abroad, that the effects of climate change and the transition to reduced reliance on carbon-emitting sources of energy represent one such risk,” he continued. “While many of our jurisdictions have remained resilient through severe weather events, changing climate conditions pose greater challenges ahead. These include rising sea levels, increases in the frequency and severity of events, and new types of natural disasters. Deposit insurers, including the FDIC, must prepare accordingly to ensure that the financial system and deposit insurance remain strong.”

Those impacts will be felt more strongly by some than others, he noted. “Studies in the United States have found that the adverse effects of climate change may have a disproportionate impact on the financially vulnerable,” he said. “As such, the manner in which deposit insurers prepare should consider and seek to reduce potential shocks on jurisdictions and communities least able to respond.”

Gruenberg said addressing the financial risks posed by climate change is one of his agency’s top priorities. He said the FDIC strongly supports the IADI’s efforts in this area the consideration of climate change risks in an update to the organization’s core principles (that is, international standards).

Remarks by Martin J. Gruenberg, Acting Chairman, 21st Annual General Meeting International Association of Deposit Insurers; Buenos Aires, Argentina (Oct. 27, 2022)