Yellen’s banking agenda: tackling climate risks, launching the AML register

WASHINGTON – Limiting the impact of climate change on the financial system and launching a startup registry to tackle money laundering risks are two key priorities for the new Biden administration, according to the candidate for treasury secretary.

Former Federal Reserve Chairman Janet Yellen told the Senate Finance Committee that she plans to create a special unit within the Treasury to examine the risks climate change poses to banks and other companies financial resources of the country.

“I will seek to appoint someone at a very high level to lead our efforts and create a hub within the Treasury where we have a particular focus on financial system risks and climate change related tax incentives,” said Yellen at his nomination hearing on Tuesday. “I think we need to seriously consider assessing the risks to the financial system from climate change.”

Yellen was responding to questions from Sen. Sheldon Whitehouse, DR.I., who noted that there is “no specific office” within the Treasury Department to address the risks of climate change.

Whitehouse also lobbied Yellen about the potential impacts of climate change on the housing market.

“I will seek to appoint someone at a very high level to lead our efforts and create a hub within the Treasury where we have a particular focus on financial system risks and climate change related tax incentives,” said Janet Yellen, candidate for the Biden administration. for the Secretary of the Treasury.

Bloomberg News

“Another serious issue is Freddie Mac’s warning of a collapse in coastal property values ​​across the country due to sea level rise due to climate change,” Whitehouse said.

“I think we should take these risks very, very seriously,” Yellen replied. “I believe that climate change is an existential threat and that the impact of climate change itself and the policies to deal with it could have major impacts, creating stranded assets, generating big shifts in asset prices, credit risks, etc. which could affect the financial system. “

Yellen also congratulated Congress for spending reforms of the US anti-money laundering system, which the Treasury Department oversees through the Financial Crimes Enforcement Network.

In a recent defense spending bill, Congress passed a measure requiring companies to disclose their true owners to Fincen when they go through the incorporation process. The legislation was intended in part to ease the burden on banks, which were heretofore responsible for identifying and declaring the beneficial owners of their customers.

“I want to thank you and Congress for passing a law that will allow us to identify beneficial ownership of shell companies and really make a big, big difference in our ability to fight terrorist financing.” , Yellen said.

Yellen said she was planning to implement the AML provision of the National Defense Authorization Act quickly, by launching a database of information on the beneficial owners of companies.

“This is a very important problem and the fact that the law recently passed by Congress gives us an extremely powerful tool to address this problem,” Yellen said. “We will try to get started as quickly as possible and devote ourselves to building this database so that we can resolve these issues and we will certainly seek to give it a very high priority.”

Senators also questioned Yellen about plans by the Treasury and the Federal Housing Finance Agency to release government-sponsored businesses Fannie Mae and Freddie Mac from trusteeship. The two agencies reached an agreement last week to allow GSEs to sweep less of their profits into the treasury, allowing them to hold much more capital that they would need to re-enter the private sector.

Senator Pat Toomey, R-Pa., Described the housing finance reform as the “big unfinished business of the [2008] financial crisis. ”

“While I would prefer to go further, there is at least the end of the automatic profit sweep, there is the possibility of building up capital from retained earnings, there is now a capital target for GSEs, and there are rules that aim to limit the acquisition of the riskiest loans by GSEs, ”Toomey said.

Yellen said the Treasury Department under his leadership “will certainly give priority to studying this issue and coming up with ideas on what should be done.”

Toomey also spoke to Yellen about the role of the Financial Stability Oversight Council in designating nonbanks as systemically important financial institutions. He said it was “the right move” by the Trump administration not to designate asset managers and money market funds as SIFI.

However, Yellen has signaled that she would like to see the return of the working groups within the board, which have been disbanded, which have looked at the risks of high leverage on hedge funds, as well as mutual funds. relatively illiquid investment.

“It’s a business-based approach that the FSOC was pursuing and I thought it was the right approach,” Yellen said. “I hope to revisit some of these approaches. “

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