The U.S. Office of the Comptroller of the Currency (OCC) has appointed Dr. Yue (Nina) Chen as its first chief climate risk officer to manage climate-related financial risks.
OCC is the federal organization supervising the biggest banks in the country.
OCC believes that climate-related financial risks can impact the safety and soundness of banks through physical and transition risks. This could also threaten the economic sector and access to financial services. Therefore, hiring an officer to review the matter is critical to minimize the said risks.
Dr. Chen will focus on developing a new system to assess climate-driven risks to banks, and figure out how to monitor and manage them, the agency said in a statement.
Climate change has put more pressure on banks in figuring out how much money to lend to businesses, making pricing those loans even more difficult.
Advocates of climate-driven financial oversight say that a severe weather event that causes bigger losses to banks could threaten the stability of the financial system.
The idea to integrate climate-related risks into financial regulation came from Democratic lawmakers, who have been warning about the dangers of climate change to markets for years.
In fact, President Joe Biden has assembled a team of climate experts inside the White House, with OCC one of the agencies involved in this matter.
About 70% of the assets in the commercial banking system in the U.S. are regulated by OCC. It designated one of its bank supervisors as a climate risk officer last year to encourage banks to take climate risks into consider in their operations.
Dr. Chen’s role as a chief climate risk officer, or climate cop, is an expansion of that. She will oversee the regulator’s office of climate risk and report directly to the O.C.C.’s acting comptroller Michael Hsu.
Dr. Yue Chen has a doctorate in chemical engineering from the Massachusetts Institute of Technology. She had worked at Wall Street giant’s asset management business Goldman Sachs and the Royal Bank of Canada.
Prior to serving as OCC’s climate cop, Chen was the executive deputy superintendent in the climate division of New York State’s banking department.
Under her leadership, OCC will keep pushing for federal financial system climate risk management frameworks.
