Banking and Finance Law Daily Wrap Up, FINANCIAL STABILITY—Public Citizen: Fed leaders warn climate change may disrupt access to essential financial services, (Mar 5, 2025)

By Shashi Kant, BALLB, LLM

According to the advocacy group, recent remarks from Fed Chair Powell and former Vice Chair Barr sound a warning that climate change may soon limit access to essential financial services, posing risks to long-term economic stability.

Recent statements from Federal Reserve Board Chair Jerome Powell and former Vice Chair Michael Barr are warnings that climate change is expected to disrupt access to essential financial services and pose risks to the nation’s financial stability, according to a blog post from Public Citizen. Their remarks reflect an increased focus on incorporating climate risks into the Fed’s broader responsibilities, the advocacy group said.

Testimony before the Senate. Citing Powell’s testimony before the Senate Banking Committee, Public Citizen contended Powell acknowledged a striking and alarming reality that climate change will soon leave significant numbers of people without access to mortgages and other essential financial services. “If you fast forward 10 or 15 years, there will be regions of the country where you can’t get a mortgage, there won’t be ATMs, banks won’t have branches and things like that,” Powell stated. While discussing the role of banks in climate risk-prone areas, Powell remarked, “It’s not that the banks will stay there and keep making loans in the face of evidence of disasters, or that insurance companies will write policies.”

According to Public Citizen, “Powell downplayed risks to banks and insurance companies currently operating in these climate-vulnerable areas.” The group further noted that Powell remained silent on the Fed’s responsibility to address the broader financial stability concerns posed by reduced access to financial services.

Broadening the mandate. While Powell’s comments focused on potential service gaps, outgoing Vice Chair for Supervision Michael Barr, in a recent speech, emphasized that the institution’s responsibilities extend beyond the safety and soundness of individual banks to include preserving the public’s access to critical financial services, the blog post said. “The Federal Reserve has a responsibility to recognize emerging risks to the safety and soundness of banks, to the ability of households and businesses to access financial services, and to financial stability. Costly natural disasters could present just such risks,” Barr stated the speech. This view highlights that the financial system’s role in providing essential services—such as mortgages, personal credit, and property insurance—is central to supporting households and communities across the nation, Public Citizen argued.

“The recent wildfires in California should be a wake-up call that we need to focus on how insurance markets will need to adjust to more frequent and severe weather events,” Barr remarked. Barr’s speech also noted that the ongoing insurance crisis and the potential loss of access to credit could further strain local economies and municipal budgets.

Impact on financial services. Both Powell and Barr stressed that the implications of climate change extend beyond isolated financial institutions, Public Citizen emphasized. Powell acknowledged that while banks and insurance companies operating in climate-vulnerable areas may adjust their practices, the broader impact on consumers could be significant, the group said. These broader impacts may include reduced access to credit and essential financial services that may affect low- and moderate-income communities, posing challenges to the overall functioning of the U.S. economy, the group warned.

Regulatory independence. The blog post also touched on regulatory independence in the wake of President Trump’s recent executive order that requires all executive branch officials and employees to be subject to his supervision. “This executive order, if implemented, will greatly limit the Federal Reserve’s ability to respond to climate-related financial risks, bringing its regulatory authority under a White House committed to climate denial and reckless financial deregulation,” Public Citizen remarked. Barr warned that, if implemented, this order might constrain the Fed’s ability to address climate-related financial risks effectively, and that maintaining the Fed’s independence is critical for objectively evaluating risks and ensuring that the institution can continue to safeguard both bank stability and broad access to essential financial services, according to the blog post.

Companies: Public Citizen

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