`[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]






                                 ______



 
                      IMPORTING GLOBAL GOVERNANCE:


                        EXAMINING THE DANGERS OF


                         CEDING AUTHORITY OVER


                     AMERICAN FINANCIAL REGULATION

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 21, 2024

                               __________

       Printed for the use of the Committee on Financial Services



                           Serial No. 118-85
                           
                           
      GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
      
      
                     
      
    
             U.S. GOVERNMENT PUBLISHING OFFICE 
 56-436           WASHINGTON : 2024  
      
      
      
      
                           
                           
                           
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 21, 2024...............................................     1
Appendix:
    March 21, 2024...............................................    47

                               WITNESSES
                        Thursday, March 21, 2024

Billingsley, Ryan, Deputy Director, Capital Markets & Accounting 
  Policy, Division of Risk Management Supervision, Federal 
  Deposit Insurance Corporation (FDIC)...........................     6
Gardineer, Grovetta N., Senior Deputy Comptroller for Bank 
  Supervision Policy, Office of the Comptroller of the Currency 
  (OCC)..........................................................     8
Gibson, Michael S., Director, Supervision and Regulation, Board 
  of Governors of the Federal Reserve System (Fed)...............     5

                                APPENDIX

Prepared statements:
    Billingsley, Ryan............................................    48
    Gardineer, Grovetta N........................................    56
    Gibson, Michael S............................................    64

              Additional Material Submitted for the Record

Billingsley, Ryan:
    Written responses to questions for the record from 
      Representative Barr........................................    69
    Written responses to questions for the record from 
      Representative Meuser......................................    82
Gardineer, Grovetta N.:
    Written responses to questions for the record from 
      Representative Barr........................................    85
Gibson, Michael S.:
    Written responses to questions for the record from Chairman 
      McHenry....................................................    96
    Written responses to questions for the record from 
      Representative Barr........................................    99
    Written responses to questions for the record from 
      Representative Huizenga....................................   113
    Written responses to questions for the record from 
      Representative Kim.........................................   116
    Written responses to questions for the record from 
      Representative Meuser......................................   118
    Written responses to questions for the record from 
      Representative Steil.......................................   120


                      IMPORTING GLOBAL GOVERNANCE:



                        EXAMINING THE DANGERS OF



                         CEDING AUTHORITY OVER



                     AMERICAN FINANCIAL REGULATION

                              ----------                              


                        Thursday, March 21, 2024

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:08 a.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick McHenry 
[chairman of the committee] presiding.
    Members present: Representatives McHenry, Lucas, Sessions, 
Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, 
Hill, Loudermilk, Mooney, Davidson, Rose, Steil, Norman, 
Meuser, Fitzgerald, Garbarino, Kim, Donalds, Flood, Lawler, 
Nunn, De La Cruz, Ogles; Waters, Sherman, Scott, Lynch, Green, 
Cleaver, Himes, Foster, Beatty, Vargas, Gottheimer, Gonzalez, 
Casten, Horsford, Tlaib, Torres, Garcia, Nickel, and Pettersen.
    Chairman McHenry. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Importing Global Governance: 
Examining the Dangers of Ceding Authority Over American 
Financial Regulation.''
    I will now recognize myself for 4 minutes to give an 
opening statement.
    I want to thank our witnesses for being here. Today, we 
will examine the dangers of ceding authority of American 
financial regulation to global governance bodies. This hearing 
is a good governance exercise. Currently, there is little 
visibility into the dealings between our financial regulators 
and a complex network of international bureaucrats. This 
includes the Bank for International Settlements (BIS), the 
Basel Committee on Banking Supervision (BCBS), and the Network 
for Greening the Financial System (NGFS), just to name a few.
    That lack of transparency and accountability raises 
concerns about the extent to which other countries are 
influencing financial regulation here in the United States. In 
fact, as recently as 2017, Russian and Chinese Communist Party 
(CCP) banking officials have been scrubbing U.S. laws, 
regulations, and supervisory practices for compliance with 
Basel rules, sometimes physically on site here at U.S. 
agencies. That is absurd. To be clear, international 
cooperation can be positive and help set clear rules of the 
road for financial markets. However, when the scale repeatedly 
tips in favor of our competitors, we have a problem.
    The most glaring example of Federal banking agencies taking 
their cues from global governance bodies is the Basel III 
Endgame proposal. We have heard concerns from Members on both 
sides of the aisle about the impact of increased capital 
requirements on families, communities, and small businesses, 
but the proposal would also strengthen the competitiveness of 
foreign financial institutions at the expense of our own. Why 
would American banking regulators work to weaken our standing 
on the global stage?
    This is just the first of many questions we have for 
today's witnesses from the Federal Reserve (Fed), the Federal 
Deposit Insurance Corporation (FDIC), and the Office of the 
Comptroller of the Currency (OCC). While you are not the ones 
setting policy for your respective agencies, you have insight 
into your organization's deliberations, negotiations, and 
discussions with these international forums. That is what we 
are seeking.
    I would also remind you that you have a responsibility to 
be transparent with Congress and the American people we 
represent as we work to fulfill our obligation of checks and 
balances in our system and as we work to fill in the blanks, 
the many blanks that are currently obvious to us on the Hill.
    Unfortunately, the lack of transparency by President 
Biden's banking regulators feels more like a feature than a 
bug. When Congress has zero visibility into the agency 
officials and staff participating in various workstreams in the 
global governance bodies, traditionally-independent regulators 
become a breeding ground for politics and partisanship.
    That is why today, we will consider a bill to create clear 
reporting requirements for American financial regulators 
dealing with global governance groups and provide insight into 
global deal-making. This bill brings financial regulators in 
line with other American officials, like those of the State 
Department and the U.S. Trade Representative that adhere to 
clear reporting structures regarding their involvement 
overseas.
    I will finish with this. President Biden's banking regulars 
are attempting to force progressive pet projects, all pushed by 
global governance bodies through our financial system. And for 
those who like those policies in the other party here on the 
committee, I would tell you, when the coin flips, I don't think 
you will like the results of an opaque process in international 
regulation. I don't think you will like this. So overall, I 
think this should be a good governance operation for us to get 
insight into how these regulators are making decisions. That is 
where I want to end.
    I will now recognize the ranking member of the committee, 
the gentlewoman from California, Ms. Waters, for 4 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. Good 
morning. Last week, we marked the 1-year anniversary of the 
failures of Silicon Valley Bank and Signature Bank, with First 
Republic failing soon thereafter. These features represented 
the second, third, and fourth largest bank failures in United 
States history and threatened to snowball into a full-blown 
banking crisis. Thankfully, the actions of President Biden, 
Secretary Yellen, and the banking regulators testifying today 
stabilized the situation, averting a banking crisis, and 
protected our nation's depositors. Because of their swift 
action, our banking system remains strong. Unfortunately, it 
seems as if Republicans and big banks are pretending like none 
of this ever happened. As our banking regulators move to write 
rules that would address weaknesses in our banking system, 
including on bank capital and related to the climate crisis, 
Republicans are convening this hearing to attack any effort to 
collaborate with other countries that face the same problems.
    Right now, the global climate crisis is getting even worse, 
as evidenced by the record-breaking heat, floods, storms, 
droughts, and wildfires that communities across the United 
States are experiencing. In the face of this crisis, we are 
seeing big banks and major financial institutions give into 
extreme MAGA Republicans and walk back many of the climate 
commitments they made to strengthen our banking system.
    Just last year, Bank of America walked back its commitment 
and began financing new coal mines, coal-burning power plants, 
and Arctic drilling projects. In addition, JPMorgan, State 
Street, PIMCO, and BlackRock all pulled out of an international 
coalition aimed at addressing climate issues. Let's be clear: 
Climate change is real, and climate-related-financial risk must 
not be ignored. It is critical that our financial institutions 
take these threats seriously instead of feeding into the 
extreme MAGA Republican's anti-ESG campaign.
    As if that wasn't bad enough, big banks are spending 
millions of dollars to gut the proposed Basel III Endgame rule 
to increase capital. Over the last several months, their 
executives have proven that they care more about protecting 
their million-dollar bonuses and further padding their pockets 
than they do about making Americans' banking stronger in the 
service of working families.
    Today, you will hear Republicans try to undermine our 
regulators as the regulators collaborate with their foreign 
counterparts to ensure that our global and interconnected 
financial system is strong. This adds to the long history 
Republicans have of abandoning our international partners and 
hurting our global standing in the process. Time and time 
again, Republicans shamelessly defend comments made by twice-
impeached, 4-times-indicted, former President Trump, who 
attacks our partners in NATO and the U.N. Let's be clear: 
Extreme MAGA Republicans' hostility toward our allies is 
terrible for America and only weakens us as a nation.
    The US. banking system has the potential to be the 
strongest in the world, but we can't get there if our nation's 
most powerful banks and financial institutions block the 
government from devising policy that protects our nation's 
consumers. Rest assured, Committee Democrats are fighting back 
and working around the clock to strengthen the safety and 
soundness of the banking system, protect depositors, and 
prevent future financial crises. I don't know what more I can 
say. With that, I yield back the balance of my time.
    Chairman McHenry. The ranking member yields back. I will 
now recognize the Chair of our Subcommittee on Financial 
Institutions and Monetary Policy, Mr. Barr, for 1 minute.
    Mr. Barr. Well, that was something. Today, we will discuss 
the interplay among financial regulators and a growing and 
tangled web of global governance bodies, such as the Basel 
Committee on Banking Supervision, the Bank of International 
Settlements, and the Network for the Greening of the Financial 
System. The American people and their elected representatives 
know next to nothing about how U.S. regulatory agencies 
negotiate deals within these bodies. Those deals, we are told, 
are nonbinding, yet they become binding when U.S. regulators 
abide by them and respond to pressure from the global 
governance web to comply.
    Recently, we have seen global governance in action with 
reference to some framework agreements in the Basel III Endgame 
that no elected official negotiated or signed. This begs the 
question, who is in charge? We will seek answers, since it 
appears that unelected bureaucrats and global governance bodies 
have the abilities to bypass Congress, U.S. law, and even 
governing boards of Federal financial regulators to achieve 
their goals.
    Chairman McHenry. The gentleman's time has expired. The 
Chair now recognizes the ranking member of our Subcommittee on 
Financial Institutions and Monetary Policy, Mr. Foster, for 1 
minute.
    Mr. Foster. Thank you, Mr. Chairman, and thank you to our 
witnesses. As the global economy changes, financial firms and 
their regulators must remain well-apprised of new and emerging 
risks. Geopolitical tensions, climate change, and emerging 
technologies like AI pose new challenges that will affect not 
only the economy of the United States, but economies from 
around the world. The BIS estimates there are nearly $38 
trillion of cross-border claims among banks today, and there 
are regulatory lessons to be learned from the only global 
systemically important bank (G-SIB) failure since the Dodd-
Frank Act, which was not in the U.S., but was Credit Suisse.
    Forums like the Financial Stability Board (FSB) and the 
Basel Committee on Banking Supervision (BCBS) allow us to 
advance our national interests and leverage the influence of 
the United States in the development of international 
standards. The argument that our regulators, by participating 
in these international organizations, are somehow ceding their 
authority to the international community is misguided. U.S. 
regulators have no obligation to adopt the standards developed 
by these organizations, and any regulatory proposal informed by 
their participation must adhere to the same legal and 
procedural requirements as any other proposal by U.S. 
regulators.
    Chairman McHenry. The gentleman's time has expired.
    Mr. Foster. Thank you, and I yield back.
    Chairman McHenry. Today, we welcome the testimony of Dr. 
Michael Gibson, Director of Supervision and Regulation at the 
Board of Governors of the Federal Reserve System; Mr. Ryan 
Billingsley, Deputy Director of Capital Markets and Accounting 
Policy at the Division of Risk Management Supervision at the 
Federal Deposit Insurance Corporation; and Ms. Grovetta 
Gardineer, Senior Deputy Comptroller for Bank Supervision 
Policy at the Office of the Comptroller of the Currency. We 
thank each of you for being here. We will recognize you each 
for 5 minutes for an oral presentation of your testimony. And 
without objection, each of your written statements will be made 
a part of the record.
    And we will begin with you, Mr. Gibson.

   STATEMENT OF MICHAEL S. GIBSON, DIRECTOR, SUPERVISION AND 
 REGULATION, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 
                             (FED)

    Mr. Gibson. Chairman McHenry, Ranking Member Waters, and 
members of the committee, thank you for the opportunity to 
discuss the Federal Reserve Board's engagement with 
international organizations on supervisory and regulatory 
matters.
    The Board participates in various international forums in 
support of its statutory responsibilities of supervising and 
regulating financial institutions and fostering financial 
stability. In a globally-interconnected financial system, 
financial shocks can quickly propagate across national borders, 
and the Board seeks to promote the stability of the U.S. 
financial system by supporting strong and consistent minimum 
regulatory standards and sound supervisory practices for 
financial institutions globally.
    Engagement with international organizations also has been 
an effective and efficient means for understanding and sharing 
information on global financial risks, as well as an 
opportunity for the Board to help shape international standards 
and recommendations to the nature and needs of the U.S. 
financial system. It is also important to note that the 
standards and recommendations are not binding on any 
jurisdiction or member, including the United States and the 
Federal Reserve. Any changes to the regulations that apply to 
U.S. firms would be proposed by the Federal Reserve and go 
through our usual public notice-and-comment process.
    In support of its goal to enhance the strength, stability, 
and resilience of the financial system, the Board actively 
participates in the Basel Committee on Banking Supervision, the 
Financial Stability Board, and the International Association of 
Insurance Supervisors (IAIS). The Board is also a member of the 
Network for Greening the Financial System (NGFS). Although the 
NGFS is not a standard-setting body, Board staff participate in 
its working groups to understand how other central banks are 
approaching climate-related financial risks.
    Each international group that we participate in has a 
unique organizational structure and purpose and holds regular 
meetings. The nature of the Board's participation varies 
accordingly by group. The Board promotes U.S. interests by 
participating in the main groups and subgroups and has 
leadership roles on major issues. As part of this work, we 
coordinate with other U.S. participants, such as the FDIC, the 
OCC, the SEC, Treasury, the Federal Insurance Office (FIO), and 
State Insurance Commissioners. These international groups are 
consensus-driven organizations. Participants seek to reach a 
common understanding around material issues and consider what 
policy choices could help to address those issues.
    Although it can be challenging to work through complex 
issues, this approach serves as a check on potentially 
undesirable policy recommendations. As with any other process, 
alternative viewpoints emerge and dissenting opinions are 
voiced. Before standards or recommendations are finalized, they 
are often subject to public consultation and the comments 
inform any final decisions.
    Staff from the Board engaged in these groups consult 
regularly with Board principles to ensure any final 
recommendations or standards align with the Board's policy 
goals. Once standards or recommendations are finalized, it is 
then up to individual members to implement any changes as 
appropriate in their respective jurisdictions. While the Board 
participates in these organizations, it is under no obligation 
to adopt any standards or recommendations that are developed. 
When the Board makes decisions about policy, it does so on the 
basis of its own domestic statutory mandates and 
responsibilities and in accordance with U.S. administrative 
law, importantly, including an opportunity for public comment 
on the proposal. The Board does not implement standards or 
recommendations that are beyond the scope of our mandate or are 
otherwise not appropriate for our banks and our financial 
system.
    The Board is committed to transparency in its own work and 
supports transparency by the international organizations in 
which it participates. These international organizations 
publish information to keep the public informed of their work. 
The Board supports efforts by international organizations to 
regularly publish information, including annual work plans and 
meeting summaries, and to subject work products, such as 
proposed international standards and supervisory principles, to 
public comment. Congressional oversight is an important feature 
of the U.S. regulatory framework. Congress has an oversight 
role for the Board's activities, including its participation in 
international organizations, and we welcome that oversight.
    Thank you, and I am happy to answer any questions you may 
have.
    [The prepared statement of Director Gibson can be found on 
page 64 of the appendix.]
    Chairman McHenry. Thank you. Mr. Billingsley, you are now 
recognized.

STATEMENT OF RYAN BILLINGSLEY, DEPUTY DIRECTOR, CAPITAL MARKETS 
 & ACCOUNTING POLICY, DIVISION OF RISK MANAGEMENT SUPERVISION, 
          FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

    Mr. Billingsley. Chairman McHenry, Ranking Member Waters, 
and members of the committee, I am pleased to appear at today's 
hearing to discuss the FDIC's engagement with international 
organizations. The FDIC's core mission is to maintain stability 
and public competence in the U.S. financial system. The FDIC 
carries out this mission through its responsibilities for 
deposit insurance, banking supervision, and the orderly 
resolution of failed banks. The FDIC's international engagement 
is guided by the same mission.
    My testimony today will discuss the FDIC's engagement with 
international organizations, including the Financial Stability 
Board (FSB), the Basel Committee on Banking Supervision (BCBS), 
the Network for Greening the Financial System (NGFS), and the 
International Association of Deposit Insurers (IADI).
    The Financial Stability Board, or FSB, was established to 
improve international coordination and promote effective 
regulatory, supervisory, and other financial sector policies. 
While the FDIC is not a member of the FSB plenary, the FDIC is 
a member of the Resolution Steering Group (ReSG). As a member 
of the ReSG, the FDIC has helped to develop international 
standards and guidance on the resolution of global systemically 
important financial institutions (G-SIFIs). Our contributions 
in this area have enabled the U.S. resolution regime to serve 
as a model for effective resolution regimes in other 
jurisdictions.
    The Basel Committee on Banking Supervision, or BCBS, is an 
international standard setter for the prudential regulation of 
banks and provides a forum for regular cooperation on banking 
supervisory matters. The FDIC engages the BCBS in support of 
its mission, and the BCBS aims to improve consistency of 
standards internationally. Through their work at the BCBS, the 
FDIC and the other Federal banking agencies have sought to 
strengthen the stability and resiliency of the banking sector, 
both domestically and abroad.
    The Network for Greening the Financial System, or NGFS, is 
a forum for collaboration and information-sharing among central 
banks and banking supervisors. Importantly, the NGFS is not a 
standard-setting body. The FDIC engages with members of NGFS to 
foster collaboration and share best practices in addressing 
climate-related financial risks.
    The International Association of Deposit Insurers, or IADI, 
is a forum for deposit insurers from around the world to gather 
and share knowledge and expertise. Its mission is to contribute 
to the enhancement of deposit insurance effectiveness by 
promoting guidance and international cooperation. As a member 
of IADI, the FDIC has supported the development of standards 
and best practices for depositor insurers around the world. The 
FDIC's work at IADI contributes to the stability of the global 
financial system by promoting international cooperation in the 
field of deposit insurance.
    To reiterate, the FDIC engages in international 
organizations in support of maintaining effective deposit 
insurance, bank supervision, and resolution systems. It is 
important to note that standards developed by these 
organizations do not have legal force. The implementation of 
any standard in the United States remains subject to the U.S. 
notice-and-comment rulemaking process, and the FDIC may elect 
to consider different standards that more appropriately reflect 
the specific characteristics of U.S. markets.
    I would like to close by saying that it is a privilege to 
work alongside so many talented people at the FDIC. They 
dedicate their careers to serving the public and the FDIC's 
mission, and I want to acknowledge and thank them all for all 
that they do. Thank you. I look forward to your questions.
    [The prepared statement of Deputy Director Billingsley can 
be found on page 48 of the appendix.]
    Chairman McHenry. Ms. Gardineer, you are now recognized.

 STATEMENT OF GROVETTA N. GARDINEER, SENIOR DEPUTY COMPTROLLER 
 FOR BANK SUPERVISION POLICY, OFFICE OF THE COMPTROLLER OF THE 
                         CURRENCY (OCC)

    Ms. Gardineer. Chairman McHenry, Ranking Member Waters, and 
members of the committee, I am pleased to testify before the 
committee to discuss the OCC's engagements with the 
international forums to advance the agency's mission to ensure 
that national banks and Federal savings associations operate in 
a safe and sound manner, provide fair access to financial 
services, treat customers fairly, and comply with applicable 
laws and regulations. I oversee several of the agency's policy 
units, including those that participate in issues related to 
international banking.
    My written statement discusses the OCC's participation in 
international forums and the benefits this provides to the U.S. 
banking system. The OCC supervises several banks and U.S. 
affiliates of foreign banks that conduct business on a global 
scale. It is critical in our role as a prudential supervisor to 
understand the full scope that these global operations present 
so that we can assess the effectiveness of the bank's risk 
management policies and programs.
    Engaging with foreign counterparts is critical to achieving 
that understanding. International forums present an opportunity 
for regulators and supervisors to share knowledge and discuss 
common approaches, practices, and policies while fulfilling 
their individual supervisory mandates, and ultimately 
supporting the integrity of global financial markets.
    The OCC is a member of several international forums or 
their subgroups, including the Basel Committee on Banking 
Supervision, the Financial Stability Board, the Financial 
Action Task Force (FATF), and the Network for Greening the 
Financial System. The OCC's engagement in international forums 
is beneficial to the agency and the U.S. banking system.
    For example, our participation provides an opportunity to 
exercise U.S. leadership and promote U.S. policy interests by 
helping shape standards that may be adopted by jurisdictions 
around the world. Our participation helps establish a level 
playing field for global banking activities. This minimizes the 
possibility that another country's lax regulatory regime could 
give its banks a competitive cost advantage over U.S. banks or 
promote a race to the bottom by jurisdictions.
    Our membership also advances U.S. national security and 
foreign policy interests. For example, the OCC's participation 
in the FATF allows the agency to exert significant influence on 
the development, revision, and implementation of the FATF's 
Anti-Money Laundering/Combating the Financing of Terrorism 
(AML/CFT) framework to strengthen regimes worldwide. This 
reduces the exposure of U.S. banks to money laundering and 
terrorist financing risks, thus preserving the integrity of the 
U.S. financial system and supporting the achievement of 
national security goals.
    In addition, OCC's engagement in international forums 
supports the development of more-consistent global frameworks, 
which makes it easier for internationally-active U.S. banks to 
understand what to expect in other operating environments. It 
also provides a venue for sharing supervisory and regulatory 
principles, practices, and perspectives. This can be especially 
helpful in educating members about developing issues and 
innovative topics, such as crypto assets, tokenization, 
generative artificial intelligence, and other developing 
technologies, particularly since these products and 
technologies do not recognize international borders.
    As a U.S. Federal regulator, the OCC maintains its 
independence. While international consistency is valuable, the 
OCC's priority is the safety, soundness, and fairness of the 
U.S. financial system. Any standards developed by the 
international forums in which the OCC participates inform OCC 
rulemakings, but are not otherwise applicable to federally-
supervised banks without further action.
    In conclusion, the OCC participates in international forums 
to further U.S. interests, gain a better understanding of 
global developments in the financial industry to move the 
international regulatory framework toward more consistently 
high and appropriate standards, and strengthen our 
relationships with foreign counterparts. Thank you, and I look 
forward to answering your questions.
    [The prepared statement of Senior Deputy Comptroller 
Gardineer can be found on page 56 of the appendix.]
    Chairman McHenry. Thank you all for your testimony. I will 
now recognize myself for 5 minutes for questions.
    I will begin with you, Mr. Gibson, on behalf of the Federal 
Reserve. The Basel Committee's charter requires a public 
consultation process for all Basel standards. Yet, in May 2022, 
the Basel Committee, without public consultation, altered the 
G-SIB surcharge for the largest banks, but specifically for 
European Union banks. The net result was for European G-SIBs, 
European large banks, there was a 50-basis-point reduction in 
their capital surcharge. Are you aware of this?
    Mr. Gibson. Yes.
    Chairman McHenry. Okay. At the time, there were several 
critics of the secretive change to the G-SIB framework, 
including the progressive group, Better Markets, who described 
the Basel Committee as shamefully lowering capital requirements 
for European banks without public input. Does the Federal 
Reserve believe that there is public input in that process?
    Mr. Gibson. You are asking if the Basel Committee put that 
change out for public comment? I don't know. I don't remember.
    Chairman McHenry. You don't remember? Okay.
    Mr. Gibson. On that particular change, I can check and get 
back to you.
    Chairman McHenry. So, there is a most significant change in 
capital surcharges until the next set of negotiations at the 
Basel Committee, which resulted in much higher capital 
surcharges for U.S. banks, which is now going through the 
Federal Reserve process and all of the regulators for this 
additional Michael Barr approach to new capital standards. How 
does the Federal Reserve reconcile relaxing European large bank 
capital surcharges, and yet, in the next negotiation, 
increasing U.S. capital surcharges on our U.S. domestic banks?
    Mr. Gibson. With respect to the G-SIB surcharge, it was one 
of the post-2008 financial crisis----
    Chairman McHenry. No, no, this was 2022, a decade after the 
financial crisis. Let's not misstate this. That is what I am 
asking you about, 2022, and then, last year.
    Mr. Gibson. In the U.S., we, the Federal Reserve, have 
proposed some modifications to the G-SIB surcharge.
    Chairman McHenry. I am aware of that. I am asking you about 
the Basel Committee and the name of this committee hearing on 
the international coordination. The justification from the Vice 
Chair of the Fed was that we have to implement the Basel 
standards. That is the justification, so that is why I am 
asking about this international coordination.
    Mr. Gibson. We do coordinate at the Basel Committee on 
common approaches to things like the G-SIB surcharge, but we 
implement them domestically according to our rulemaking 
process.
    Chairman McHenry. Okay. I understand that, but you then 
negotiate those standards internationally and have agreement 
internationally. That is what the Basel Committee does. Is that 
correct?
    Mr. Gibson. Yes.
    Chairman McHenry. This is what I am trying to highlight for 
Members here. Who attends these Basel Committee meetings on 
behalf of the Federal Reserve? Do you have a designated staff?
    Mr. Gibson. I attend the Basel Committee meetings, and 
Chair Powell and Vice Chair Barr attend the oversight body of 
governors and heads of supervision.
    Chairman McHenry. Was there a vote on this question of the 
European Union G-SIB surcharge, the reduction in capital 
standards? Was there a vote at the Basel Committee on that?
    Mr. Gibson. The decisions aren't voted on; they are by 
consensus.
    Chairman McHenry. By consensus. So, you put out reports, 
but we don't know relative opinions, the Federal Reserve's 
view, the FDIC's view, the OCC's view; what we get is just the 
result in these disclosures? I am asking what U.S. nationals 
are doing on behalf of implementing financial policy and the 
opinions going in and the results coming out, which we don't 
have disclosures on.
    Mr. Gibson. In the example that you are citing of the 
discussions in the Basel Committee around the changes to the G-
SIB surcharge, the way we would handle that is that I would 
brief Vice Chair Barr about what the discussions are at the 
Basel Committee. And nothing that is done in the Basel 
Committee is binding on us, but we do want to give good input 
and we would give our input into those discussions.
    Chairman McHenry. Okay. This is the basic question for all 
regulators. We send the U.S. Trade Representative out 
internationally. We know who is negotiating for us. There are 
disclosures back to Congress on implementing trade laws. We 
have financial regulators that are implementing stuff that is 
even more impactful than trade negotiations, that have a direct 
bearing on domestic lending to small businesses and families 
and mortgages, and yet, we have no disclosures on it, we have 
no equivalent disclosures on it. That is the driving question 
here, and that is the reason why we are having this hearing. 
This is what I want to highlight. This one example with the Fed 
lowering European bank capital standards, and in the same 
breath, in the same committee internationally, raising U.S. 
capital standards in the next set of meetings. And yet, we have 
no justification for this, nor the relative opinion of the 
Federal Reserve.
    With that, I will now recognize the ranking member, Ms. 
Waters, for 5 minutes.
    Ms. Waters. Thank you, Mr. Chairman. Dr. Gibson, the Fed 
participates as a member of the Basel Committee, and that 
organization came to an agreement in 2017 with respect to the 
Basel III Endgame proposal to strengthen bank capital 
requirements. And while Republicans like to bash international 
agreements, even former Secretary Steven Mnuchin applauded the 
2017 agreement, saying, ``The reforms would standardize the 
approach to capital regulation, improve the quality and 
consistency of bank capital requirements, and level the playing 
field for U.S. banks.''
    Recently, Treasury Secretary Yellen highlighted the 
importance of getting these rules implemented when she 
testified on FSOC's annual report. Unfortunately, it took our 
regulators more than 6 years to issue a proposal to implement 
the 2017 Endgame reforms, which the Fed and other banking 
regulators finally did last year. That is because Trump's other 
appointees decided to prioritize deregulating regional banks, 
including allowing large banks like SVB to opt out of capital 
requirements related to their securities portfolio that had 
large unrealized losses.
    Dr. Gibson, can you confirm that in the Fed's report on the 
failure of Silicon Valley Bank, you found that the bank 
appeared better capitalized by nearly 2 percent because of this 
opt-out for Accumulated Other Comprehensive Income (AOCI)?
    Mr. Gibson. We only apply that AOCI passthrough to the 
largest banks, and it was not applied to Silicon Valley Bank. 
That is correct.
    Ms. Waters. Thank you. Would you confirm that the Basel III 
Endgame rule will fix this loophole and ensure that other large 
banks are being capitalized?
    Mr. Gibson. That was what the agencies proposed last year. 
It is out for comment, and we received comments on that 
provision, so we are reviewing the comments.
    Ms. Waters. Thank you. I know your agencies are getting a 
lot of pushback from the banks and are looking at making 
changes, but this rule is absolutely critical to preventing a 
future failure and protecting consumers across the country, so 
I urge your agencies to finalize the rule this year.
    Ms. Gardineer, I appreciate you sharing OCC's work on 
international bodies where you can collaborate and learn from 
what other countries are doing. However, it seems like the 
United States is behind the curve in addressing climate-related 
risks compared to other countries. For example, regulators in 
the United Kingdom included climate change in their insurance 
and stress testing 4 years ago, and the Bank of England 
designed their 2021 stress test to aid their economy's 
transition to net zero and to analyze climate-related risk on 
capital requirements. What is your agency learning from foreign 
regulators that you seek to update requirements to ensure our 
banks are absolutely and adequately considering and addressing 
climate-related financial risks?
    Ms. Gardineer. Thank you for the question, Ranking Member 
Waters. In our engagement with the NGFS as well as the Basel 
Committee, we are learning and sharing knowledge about what 
their experience has been in implementing their rules and their 
engagement. What we have done here at the OCC is, starting in 
2022, the OCC began reviewing information on our largest 
institutions by doing a range of practice reviews based on some 
of the things that we have learned from our international 
engagement. While we are doing that, we also acknowledge that 
many of the largest banks--and that has been the focus of our 
engagement and our work--have started to do climate-related 
financial risk activities of their own initiative. So 
understanding what the experience has been on an international 
basis helps us to frame our approach going forward.
    Ms. Waters. Thank you. What is your agency learning from 
foreign regulators as you seek to update requirements to ensure 
our banks are adequately considering and addressing climate-
related financial risk?
    Ms. Gardineer. We are looking at and learning about how 
they are doing their risk management, what they are doing with 
regard to transition risks, what they are doing with regard to 
physical risks. Those issues actually are very important to our 
risk management approach as we consider how we will implement 
that here at the OCC.
    Ms. Waters. Thank you very much, and I yield back the 
balance of my time.
    Chairman McHenry. The gentleman from Arkansas, the Vice 
Chair of the committee, Mr. Hill, is now recognized for 5 
minutes.
    Mr. Hill. Thank you, Mr. Chairman. And thanks to our panel 
for being with us today. Thanks for your contributions to this 
discussion, because it is so important that when we think about 
American leadership, we think about that across-the-board, 
including in harmonizing regulations around the world. But this 
is a tough time, I think, in the U.S., because we have a group 
of people in our country who think that Europe has all the 
solutions to so many issues, whether we are talking about 
privacy on GDPR, investment research or investment standards, 
artificial intelligence, and, of course, a topic today, the 
Basel III standards on setting global capital standards.
    During my time at the Treasury and as a White House 
official, it was the real mission of our regulatory agencies 
and our policy leaders to be sure that our government would 
defend our ability to have the regulatory system that we want, 
that we think is proper for our companies in a Federal republic 
for competitiveness purposes.
    Sure, we are going to go to these meetings, and we are 
going to listen to all of this stuff, and we are big picture 
for harmonization, but we are really big picture for America's 
competitive position. And we wouldn't agree to anything, even 
if it was harmonious, that we thought would put us in an 
anticompetitive position for our capital markets, for our 
financial conditions here. But I don't see that consistently as 
a policy position in the Biden Administration at all, and U.S. 
financial regulation seems to be, as I say, being subsumed by 
European ideas, which I don't think are in the right direction.
    Last week, the SEC published their climate disclosure rule 
for public companies, and that is the most recent example of a 
bad idea inboarded from across the Atlantic. In today's 
hearing, you are going to hear us talk about pervasive ways 
that this is shaping regulations here at home, including this 
incorporation of climate activism into our Federal prudential 
supervisory framework.
    Following up on Chairman McHenry's line of questioning, 
let's talk about theBasel Endgame. The U.S. clearly has a 
higher surcharge for G-SIB banks than those in Europe. Our 
stress capital buffer is based on supervisory stress tests, 
among other things, which are all more strict than in Europe. 
Would you agree with that, Dr. Gibson?
    Mr. Gibson. On both of those matters? Yes, I would agree.
    Mr. Hill. It seems to me when I look at the 800-plus-page 
proposal from Basel III, and that is why I think there were so 
many negative comments that we already have a strict Basel III 
level or above-capital standard, and it exceeds that in Europe. 
And I think a lot of people feel like some of this is 
redundant. The ranking member talked about Steve Mnuchin, our 
former Treasury Secretary, talking about his hope--his 
statement was a hope that the reform would standardize the 
approach, and improve the quality and consistency of bank 
capital, and that that would help level the playing field for 
U.S. banks. I find it to be just the opposite. How many people 
wrote to you in support of Basel III in the rulemaking, Dr. 
Gibson? What percentage of the comments were positive?
    Mr. Gibson. Most of the comments were negative, not 
positive.
    Mr. Hill. And were some of those comments about level 
playing field U.S. banks for the big banks?
    Mr. Gibson. We got comments about that.
    Mr. Hill. Yes, and I bet a lot of them felt like, God, this 
is making it worse, not better. Would that be generally true 
based on what you read from the comments?
    Mr. Gibson. We got comments in both directions, but most of 
the comments were negative.
    Mr. Hill. Yes. I think it doubled down on gold-plating and 
puts the U.S. absolutely at a disadvantage with international 
banks at the top, and it is inconsistent, including with what 
is going on in the U.K., Japan, and Canada. Let me ask you 
this: Did you participate in writing the memorandum that we 
received last May about the look back at the Silicon Valley 
Bank supervisory process?
    Mr. Gibson. We had staff who----
    Mr. Hill. But you reviewed it, did you not?
    Mr. Gibson. Yes.
    Mr. Hill. Because that is an important document, and Vice 
Chair Barr was great at being so responsive to the committee. 
In your view, what was the top issue, the two mistakes that 
Silicon Valley Bank made?
    Mr. Gibson. They didn't manage their interest rate risk or 
liquidity risk well.
    Mr. Hill. Right, and neither one of those is dependent on 
capital. I think the issue here is that supervisors failed, 
their management failed, and customers were not attentive, and 
to try to connect Silicon Valley Bank to whether we should or 
should not adopt Basel III Endgame is a false canard. I yield 
back.
    Chairman McHenry. The gentleman from California, Mr. 
Sherman, is now recognized for 5 minutes.
    Mr. Sherman. It seems odd that those who oppose this 
improvement in our regulations are listing xenophobia, when in 
fact, what you folks are doing goes far beyond the European 
standards, as the gentleman from Arkansas pointed out. I don't 
know whether the standards you are adopting are too high, but I 
do know that if they are, we shouldn't be blaming the 
Europeans, because their standards are not too high. We are 
told that we should ignore climate, but I don't see anybody on 
this committee investing in the sovereign debt of the 
Maldives--it is predicted that the Maldives will be an entirely 
submerged nation by the end of this century. I won't even ask 
the question of our bank regulators here, but I would think 
that if all of a bank's assets were divested in the Maldives, 
you would notice that subaquatic countries usually can't pay 
their debt.
    What concerns me here is that we are going to make some 
mistakes in how we adopt these regulations, and I don't think 
we should blame the Europeans for that. The first of these is, 
it is my understanding that these proposed regulations give no 
weight to private mortgage insurance (PMI). Is that true, and 
are you going to fix it? I will ask our first witness.
    Mr. Gibson. We have gotten comments on the issue of 
mortgages, generally, and private mortgage insurance, in 
particular. The proposal doesn't change the treatment of 
private mortgage insurance. It is recognized in a particular 
way in the current capital rules, and that is not proposed to 
change in the proposed rules. We have gotten a lot of comments 
on that.
    Mr. Sherman. You are not changing risk weights on loan-to-
value ratios that ignore the effect of private mortgage 
insurance?
    Mr. Gibson. The proposal would change the risk weights to 
make them risk-sensitive.
    Mr. Sherman. And changing those risk weights, you would 
have the same rate for mortgages or the same loan-to-value 
ratio whether there was mortgage insurance or there wasn't 
mortgage insurance. Is that correct?
    Mr. Gibson. Not necessarily.
    Mr. Sherman. That is what everybody in the industry is 
saying. Do any of our witnesses want to assure me that private 
mortgage insurance is going to be reflected in the risk the 
bank has taken?
    Mr. Billingsley. Certainly, we can't make that assurance, 
but like Mike said, I think that is an area where we get a lot 
of comment from the industry for sure.
    Mr. Sherman. Okay. Now, under the proposed rules you are 
doing, you are appropriately treating tax credits owned by 
banks for low-income housing, but you are treating much worse 
tax credits for clean energy. Is that something that I can 
count on you to clean up? I will ask the witness at the far 
end.
    Ms. Gardineer. Congressman Sherman, I think we have gotten 
a lot of comments about that, and we are thoroughly reviewing 
those comments and the process is moving forward. And we will 
address those in any final product that we issue.
    Mr. Sherman. Okay. Now, in a capitalist society, the 
allocation of capital is critical, and it is often a fight 
between Wall Street and my local pizzeria, my local Main Street 
business. And throughout this process, you have tilted things 
toward Wall Street and against Main Street.
    First, you have a rule of only 65 percent waiting for a 
company that happens to be publicly traded, whereas a company 
of equivalent risk is 100 percent.
    Second, you do not mark to market long-term bonds held if 
the bank just says that they are going to hold them to 
maturity.
    Finally, on that 65-percent rule, not only do you hit small 
and medium-sized businesses, but also mutual funds and pension 
plans.
     Can I be assured that when these rules actually come out, 
that small businesses, mutual funds, and pension plans will not 
be discriminated against as compared to publicly-traded 
corporations? Mr. Billingsley?
    Mr. Billingsley. Again, I can't provide you the assurance 
you are asking for, but the issue you raised about the 
corporate risk weight is a really important one.
    Mr. Sherman. I want to get in one more thing. You guys are 
obviously getting a lot of input, including in this room. Can I 
be assured that you are getting more input from Americans than 
Europeans in writing these rules? I will ask each witness. More 
from Europeans or more from Americans in terms of total input?
    Mr. Gibson. More of the comments are from Americans.
    Mr. Sherman. And more of the committee hearings----
    Mr. Gibson. Likewise.
    Mr. Sherman. ----and meetings. Is that correct? And I will 
ask our third regulator.
    Ms. Gardineer. Yes.
    Mr. Sherman. Okay. So if you guys screw it up, don't blame 
the Europeans, and if you oppose these rules, don't enlist as 
xenophobia. I yield back.
    Chairman McHenry. The gentleman's time has expired. The 
gentleman from Oklahoma, Mr. Lucas, is now recognized for 5 
minutes.
    Mr. Lucas. Thank you, Mr. Chairman. The Basel Committee on 
Banking Supervision is the primary global standard-setter for 
prudential regulation of banks, and of course, the Fed, the 
FDIC, and the OCC are all members. And as we have heard today, 
there is significant concern about the lack of transparency in 
the Basel Committee's internal proceedings, which your agencies 
are party to.
    Director Gibson, are you aware if the Basel Committee 
deliberations regarding capital standards are public in any way 
or if any of the proceedings are even public-facing?
    Mr. Gibson. Yes. The Basel Committee puts out those 
standards for public comment and takes account of the comments 
when they finalize the standards.
    Mr. Lucas. But are the deliberations public, like the 
minutes from other Federal agencies?
    Mr. Gibson. They publish summaries of the meetings and they 
publish their documents.
    Mr. Lucas. Do we know that decisions by the Basel Committee 
on Banking Supervision are taken by consensus among the 
members?
    Director Gibson, why not just have each jurisdiction vote 
and have majority rule? Could you articulate about why 
consensus building is important?
    Mr. Gibson. The Basel Committee operates by consensus 
because nothing it does is binding on any country. So if 
countries are going to agree to something in the Basel 
Committee, they still have to implement it through their 
domestic process and with their domestic statutory 
responsibilities. The consensus at the Basel Committee helps 
make sure that things that countries are discussing in Basel 
are going to be consistent with our domestic statutory 
mandates.
    Mr. Lucas. So, consensus is key. Is using this model the 
only way to promote a lasting and resilient capital framework?
    Mr. Gibson. In the Basel Committee, there are no binding 
agreements possible, so there are no votes, and there is really 
no other way the Basel Committee can have those discussions 
other than operating by consensus. It is different from 
legally-founded organizations.
    Mr. Lucas. Maybe the Fed should use the same kind of 
system. That said, thinking about my colleague, Mr. Hill's, 
observations, you are all aware of the significant concern that 
the Basel Endgame proposal from your agencies will disadvantage 
U.S. banks on multiple fronts. There has been much discussion 
about that here. The proposal goes far beyond the capital 
requirements that banks and other jurisdictions are subject to, 
like the EU.
    Director Gibson, when revisiting capital standards, to what 
extent does the Fed consider the implication of Basel standards 
by our international counterparts, the nature of the playing 
field?
    Mr. Gibson. We definitely look at the competitive 
landscape. Yes, we look at that.
    Mr. Lucas. Okay. The charter for the Basel Committee 
requires that each member commit to implementing the 
committee's decisions. From my understanding, the Basel 
Committee assesses the timeliness and the completeness of 
domestic regulations. However, of course, in the United States, 
we have a process that, in theory, should inform the making of 
rules.
    Director Gibson, focusing on Basel III Endgame proposal, I 
am concerned that there could be an unwillingness by the Fed to 
deviate too far from the Basel capital standards, given the Fed 
is already committed to implementation. So, how much weight 
does the Fed give to these past commitments as a member of the 
Basel Committee during the Fed's rulemaking process?
    Mr. Gibson. The Fed's rulemaking process is going to be 
focused on what is the best rule to implement our domestic 
statutory mandate.
    Mr. Lucas. As long as it is not contrary to the commitments 
we have given to the other entities. Okay. I will note that in 
Europe, implementation of the Basel Committee standards is done 
through the legislative process, through their parliament. In 
the United States, the Basel standards are solely left up to 
banking regulators. That makes the revision period after 
comment intake even more important, and it is the sole 
opportunity for the public to be heard.
    One last thought: The Basel Committee comprises 45 members 
consisting of central bank regulators from 20 jurisdictions, 
including your agencies, and the central banks of Japan, 
Indonesia, Mexico, and around the world.
    Director Gibson, in the internal Basel meetings, does equal 
weight apply to each member? Whether you are a big economy or a 
small economy, does equal weight apply to each member's 
consensus-building process?
    Mr. Gibson. It is a consensus-driven organization, but 
certainly the U.S. has a big role, because we are the world's 
largest economy.
    Mr. Lucas. Ironically, Mr. Chairman, only a handful of 
countries have significant banks. With that, I yield back.
    Mr. Hill. [presiding]. The gentleman yields back. The 
gentleman from Georgia, Mr. Scott, is recognized for 5 minutes.
    Mr. Scott. Thank you, Chairman Hill. Director Gibson, here 
is the situation as I understand it. Under Basel, different 
jurisdictions are given national discretion to increase or 
decrease certain components of the regulatory framework based 
upon their own needs. Is that correct?
    Mr. Gibson. Yes, that is correct.
    Mr. Scott. The significant increase in U.S. capital 
requirements related to banks' trading activities has so far 
differed from the approach taken elsewhere around the world, is 
that correct? Let me get to the example here. The United 
Kingdom and Europe reforms are expected to result in roughly 3-
percent and 10-percent increases in aggregate capital levels 
across their banking sectors. Is that correct?
    Mr. Gibson. That sounds about right.
    Mr. Scott. Okay. This is compared, however, to a nearly 30-
percent increase in capital levels for the largest U.S. banks 
when including both the Basel Endgame proposal and the 
surcharge changes. Is that correct?
    Mr. Gibson. The first numbers you quoted were for all 
banks.
    Mr. Scott. Yes.
    Mr. Gibson. And now, you are quoting a different number.
    Mr. Scott. Yes, because my question is this: Why is there 
such a discrepancy between the European regulators and us here 
in the United States, our regulators, when the entire goal was 
to harmonize requirements?
    Mr. Gibson. Those comparisons are definitely one of the 
areas where we have gottens comments on our rulemaking, so we 
are going to look at that through the comment process, 
certainly.
    Mr. Scott. And what is the path forward for this proposal 
in relation to capital rules, and also, what changes are you 
considering in response to the number of comments submitted by 
businesses and consumers who have raised concerns?
    Mr. Gibson. We have gotten over 300 comments and we are 
reviewing all of them, and we will take all of those into 
account when we move forward with the final rule.
    Mr. Scott. Are you pretty much satisfied with what is going 
on here? Do you agree with the status of the situation as it 
is? Do you see any dangers? Because this is a pretty large 
differentiation between the results and activities and 
directions that the European Union is going in and what we are 
going in. But we are all connected, and there is great 
interplay between both our situation here in the United States 
and Europe, but there is this huge differentiation.
    Mr. Gibson. The Board will be making decisions going 
forward about capital based on what is good for achieving our 
domestic statutory mandates for a strong banking system and a 
strong economy.
    Mr. Scott. Now, let me ask you this about your path 
forward. For the proposal in relationship to capital rules, 
what changes are you considering in response to the number of 
comments submitted by businesses who have raised these 
concerns?
    Mr. Gibson. We are considering all of the comments that 
were received. We are looking at all of them and analyzing 
them.
    Mr. Scott. Okay. That is fine. Thank you very much.
    Mr. Hill. The gentleman from Georgia yields back. The 
gentleman from Missouri, Mr. Luetkemeyer, is recognized for 5 
minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. I thank the 
witnesses for being here this morning. It is kind of an 
interesting discussion. Let me start by saying that the various 
global governance bodies, like the Basel Committee and the 
Network for Greening the Financial System, frequently engage in 
what they call stocktakes. This is where a global governance 
body looks at what is recommended and scans the world to see 
who is doing what the global governance body wants and who is 
not. Part of the stocktaking involves surveying and monitoring, 
sometimes physically on site at the FDIC or the Fed by global 
peers.
    As recently as 2017, Chinese and Russian supervisory and 
regulatory officials participated in reviewing U.S. laws, 
rules, and regulatory framework, sometimes here in the United 
States, to determine whether we were adhering to the so-called 
recommendations. This cannot happen. We have the strongest and 
most-liquid capital markets in the world. We have the strongest 
and most-dynamic banking system, which is the envy of the 
world. Why in the world do we want to open up our regulatory 
framework to be manipulated by nonbinding recommendations from 
hostile foreign governments?
    Deputy Director Billingsley, has the BCBS or NGFS, or both, 
sent any questionnaires or monitors over to the FDIC over the 
past 5 years asking and probing the FDIC for adherence of the 
U.S. regulatory framework to the recommendations of the global 
governance body?
    Mr. Billingsley. Yes. The peer reviews you are asking 
about, we have definitely engaged in over the years, but I 
would note that the results of those things have no effect, no 
force.
    Mr. Luetkemeyer. Why in the world are you letting them in? 
That is the question. What good could come out of that?
    Mr. Billingsley. The answer to that question is that I 
think we learn a lot from engaging and understanding how 
jurisdictions' rules differ.
    Mr. Luetkemeyer. We are learning something from the 
Communist Chinese Party of China or the Russian banks? Are you 
kidding me?
    Mr. Billingsley. No, our involvement in the process more 
generally, is not specific to, I suppose, the question you are 
asking.
    Mr. Luetkemeyer. Those two banks are the ones that came 
over. I just told you that. Are you learning anything from 
them?
    Mr. Billingsley. Not during the process you are talking 
about, no, but from our involvement more broadly and being able 
to look at other jurisdictions.
    Mr. Luetkemeyer. Why are they even allowed to come in?
    Mr. Billingsley. At that time, they were both members of 
the Basel Committee.
    Mr. Luetkemeyer. Mr. Gibson, same question. Why in the 
world did you let the Russians and the Chinese come in our 
country and look at our stuff and expect them to be able to be 
good guys about this?
    Mr. Gibson. These reviews look at our laws and they look at 
our regulations, which are all public information. We share 
public bank data. And if we were to share any confidential 
data, we would anonymize it, so it wouldn't be identified to 
any bank.
    Mr. Luetkemeyer. Why even take the risk of allowing them in 
here if you say it is public information that they are looking 
at?
    Mr. Gibson. We meet with the team that wants to look at our 
regulations.
    Mr. Luetkemeyer. What are you learning from them? Anything?
    Mr. Gibson. All Basel Committee members, we share 
information about----
    Mr. Luetkemeyer. You know exactly what I am talking about. 
I am talking about the Russians and the Chinese. What are you 
learning from them, because you are allowing them in?
    Mr. Gibson. If they are reviewing our rules, then we are 
not learning. We are explaining how we have implemented things 
domestically.
    Mr. Luetkemeyer. Okay. Have you performed a similar 
oversight like that on any other countries in the world?
    Mr. Gibson. The Basel Committee does reviews of----
    Mr. Luetkemeyer. No, I am just asking, the United States 
Federal Reserve, the OCC, are you conducting those same kind of 
reviews anywhere else in the world, like the Chinese and 
Russians were doing to us?
    Mr. Gibson. We have sent staff to join some of these review 
teams in the past, yes.
    Mr. Luetkemeyer. Do you ever bring our rules and 
regulations to the Basel Committees? Instead of bringing their 
stuff here, do you ever take our stuff there?
    Mr. Gibson. We do share what we do----
    Mr. Luetkemeyer. Do they ever implement our stuff?
    Mr. Gibson. Sometimes.
    Mr. Luetkemeyer. Give me an example.
    Mr. Gibson. We recently proposed a change to our G-SIB 
surcharge formula to average the data over the year instead of 
having it be only measured at the end of the year. That is a 
proposal that was out for comment, and the Basel Committee is 
now proposing the same thing subsequently.
    Mr. Luetkemeyer. Ms. Gardineer, you made a comment a while 
ago about things that you have learned from these folks. What 
has the OCC learned from Russia or China?
    Ms. Gardineer. Congressman Luetkemeyer, the OCC takes the 
national security of the United States very serious, and we----
    Mr. Luetkemeyer. Oh, that is enough. I am done. I don't 
need platitudes.
    Here is another question for you: With regards to 
implementing these rules and regulations, I have had three 
foreign banks from Europe in my office in the last 2 weeks, and 
they laughed at me when I asked the question about Basel, 
because I said, what are you doing? Are you implementing these 
things? They said, no, we are not doing it because it makes us 
noncompetitive.
    Mr. Hill. The witness can answer that question in writing.
    Mr. Luetkemeyer. Thank you very much. I yield back.
    Mr. Hill. The gentleman's time has expired. I thank the 
gentleman from Missouri. The gentleman from Massachusetts, Mr. 
Lynch, is recognized for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman. Ms. Gardineer, just 
following up on that last line of questioning, through the FATF 
recommendations, we have the ability to project our anti-money 
laundering and terrorist financing standards on other 
countries. Is that right?
    Ms. Gardineer. That is correct, sir.
    Mr. Lynch. Yes. So if they don't comply with anti-money 
laundering regimes that we have established, and anti-terrorist 
financing standards that we have projected on other countries, 
they can't operate through our financial institutions. Is that 
correct?
    Ms. Gardineer. Yes. We have opportunities to stop that type 
of transaction.
    Mr. Lynch. Yes. I think there are 190 countries that are 
involved or are a signatory to FATF, so we make sure that those 
other countries, in order to do banking business with us, 
cannot have lower standards that would allow money laundering 
or allow terrorist financing? Is that correct?
    Ms. Gardineer. Yes. Our engagement with the FATF allows us 
to have higher and more appropriate standards to guard against 
the race to the bottom or to introduce that type of risk to the 
United States.
    Mr. Lynch. Right. And in most countries, through their 
banking system, they want to have a stamp of legitimacy, right? 
In order to attract capital, they want to show people that they 
are operating under standards that have integrity and that 
those depositors and businesses can rely upon. Is that correct?
    Ms. Gardineer. Yes. It does allow the other countries to 
understand and have a sense of confidence in a strong regime 
from other jurisdictions.
    Mr. Lynch. And there are penalties. I know that FATF on 
occasion will look, will instruct certain countries to get into 
line to raise their standards if they feel that the money 
laundering risk or the tendency of terrorist financing to occur 
in that country is out of compliance with international 
standards. Is that correct?
    Ms. Gardineer. Yes. They actually publish and make it quite 
public if there is a weakened standard in a jurisdiction.
    Mr. Lynch. Okay. Thank you. I want to jump over to 
something else. The Financial Stability Board has recently 
reported that for shadow banking--these are financial companies 
that operate in quasi-banking businesses, but they are not 
regulated like banks--the financial assets held by those shadow 
banking institutions now stands at about $460 trillion, which 
is almost about half of all financial assets that are in 
existence around the globe. I know that the Basel Committee on 
Banking Supervision is examining the vulnerabilities in that 
shadow banking world, and this is a question for all three of 
you. Could you offer your thoughts on what we have learned from 
our collaboration with international financial regulatory 
organizations to ensure that this shadow banking system is not 
creating a regulatory blind spot and a latent risk to our 
traditional banking system?
    Ms. Gardineer. I am happy to start. The nonbank financial 
institutions, I think, do pose similar risks to the United 
States and other countries around the globe. It is important 
for us to share our experiences in order to manage that risk 
and make sure that the risks do not trickle into the United 
States' financial system. So I think sharing those experiences, 
looking at that acceleration of growth allows us to have some 
harmonization around how we treat these entities.
    Mr. Lynch. Right. Mr. Gibson, would you like to add to 
that?
    Mr. Gibson. Just to say that the Financial Stability Board 
has been focusing on that topic, and by producing the report 
that you cited, they have increased the transparency around the 
nonbank financial intermediation significantly.
    Mr. Lynch. Thank you. Mr. Billingsley?
    Mr. Billingsley. I would just add that through the 
international coordination, we can learn more about how banks 
are connected to the nonbank finance system you mentioned and 
understand how we could get feedback from the banking system.
    Mr. Lynch. Okay. My time has just about expired, Mr. 
Chairman, so I will yield back.
    Mr. Barr. [presiding]. The gentleman yields back. The 
gentleman from Michigan, Mr. Huizenga, is recognized for 5 
minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. I appreciate the 
opportunity. I am going to jump right into this, since I have a 
few topics that I would like to cover. Given the recent 
finalized rule by the SEC over the climate-related disclosures, 
I thought perhaps we could explore how decision-making 
internally has influenced decisions being made by American 
regulators.
    On November 29, 2023, the Basel Committee issued a paper on 
what they call a Pillar 3 disclosure framework for climate-
related financial risks as part of its, ``holistic approach to 
address climate-related financial risks to the global banking 
system.'' The Basel Committee said its work was to, ``further 
its mandate to strengthen the regulation, supervision, and 
practices of banks worldwide with the purpose of enhancing 
financial stability and the potential design of such a climate 
framework.'' It sounds like awesome work, but in that paper, 
the Basel Committee said it was exploring disclosure 
requirements that included bank deposits and risks posed to 
banks if depositors and others, ``are impacted by climate-
related financial risks and may require drawdown of their 
deposits.''
    So, Deputy Director Billingsley, does the FDIC agree with 
the Basel Committee that it is important to consider imaginary 
climate-related bank runs as a possible source of financial 
instability? And if so, what is the reason and evidence for why 
we will see bank runs being caused by climate change?
    Mr. Billingsley. At the FDIC, we are really focused on the 
financial risks associated with climate change, so we are 
really focused on how climate-related financial risk could feed 
into the traditional banking risk.
    Mr. Huizenga. Okay. So That is my question. What is the 
reason and the evidence of why we would see bank runs being 
caused by climate change?
    Mr. Billingsley. The disclosure requirements you just 
cited, I don't think necessarily get into the details of that, 
but I think it is important to note that the disclosures you 
are talking about, we got a lot of comments back on those. I 
think the comment period for the Basel Committee ended last 
week or the week before last, so I am expecting to have some 
good----
    Mr. Huizenga. So, you need to review the comments before 
you are able to answer that?
    Mr. Billingsley. No. I just think the comments we received, 
particularly from U.S.-based entities, will be helpful.
    Mr. Huizenga. You must not leave your microphone on, but 
why aren't you able to then answer my question?
    Mr. Billingsley. I'm sorry. Could you repeat the question?
    Mr. Huizenga. For the third time, what reason and evidence 
is there that you believe that there will be bank runs related 
to climate change? You gave me gobbledygook first. Then you 
told me, well, we are getting a bunch of comments and that will 
be helpful. I asked whether you could answer my question or 
not, and you asked me to repeat the question.
    Mr. Billingsley. I am not aware of a bank run----
    Mr. Huizenga. Imagined scenario.
    Mr. Billingsley. I am not aware of a bank run at this time, 
to be honest.
    Mr. Huizenga. Okay. Well, it took three attempts, but thank 
you. In a Fed research paper authored by an official who serves 
as Co-Chair of the Basel Committee's Task Force on Climate-
related Financial Risks, an idea called, ``double 
materiality,'' was analyzed. The idea seems to be that bank 
supervisory authorities should consider both the risks that 
banks face from climate change themselves and any impacts of 
bank actions, such as to whom and where they lend on climate 
change. For example, if a perfectly legal and financially-
healthy producer of a product that the Fed might think is a so-
called, ``brown sector,'' got a loan from a bank, maybe the Fed 
would want the bank to view the loan as riskier because the Fed 
thinks that they are creating products that could potentially 
cause more wildfires or harsh storms or things like that in the 
future. Is that something with which the FDIC also agrees?
    Mr. Billingsley. No. The issue you raise about double 
materiality is not within our mandate.
    Mr. Huizenga. Okay. Director Gibson, under the guise of 
safety and soundness, what would prevent the Fed in the future 
from using existing authorities to change bank supervision 
using concepts such as double materiality to channel credit 
away from what future Fed officials and the global governance 
crowd believe are brown sectors and toward what they believe to 
be green sectors?
    Mr. Gibson. Our supervisory focus is only around safety and 
soundness. It is not around favoring one sector over another.
    Mr. Huizenga. That is not what your researchers are talking 
about.
    Mr. Gibson. Research papers are not the official position 
of the Federal Reserve. Our researchers publish their research, 
but that is not an official position.
    Mr. Huizenga. Okay. The Federal Reserve's Vice Chair for 
Supervision led a review of the Federal Reserve's supervision 
and regulation of SVB and published the results along with his 
personal cover letter that included, in my view, some biased 
and unnecessarily-politicized views that are not representative 
of the full Board, I would hope. Shockingly, some of those 
views showed up word for word, yet without attribution to Vice 
Chair Barr's report, in the Basel Committee on Banking 
Supervision's October 2023 report entitled, ``Report on the 
2023 Banking Turmoil.'' According to recent information 
provided to this committee from Fed Chair Powell, ``The Federal 
Reserve staff contributed to and have opportunities to comment 
on various work products.'' So, I will have to be following up 
with you on that, but I am very concerned about that 
interaction.
    With that, I yield back, Mr. Chairman.
    Mr. Barr. The gentleman's time has expired. The gentleman 
from Texas, Mr. Green, is recognized.
    Mr. Green. Thank you, Mr. Chairman. And I thank the ranking 
member, and the witnesses for appearing.
    In my City of Houston, Texas, we had over a trillion 
gallons of water as a result of Hurricane Harvey in 2017. Over 
a 4-day period, 68 people died. It caused $125 billion in 
damages. Now, through a process known as security realization, 
banks bundle their loans and then indirectly issue them as 
securities. As climate change begins to impact these assets, 
these securities, such as mortgages, that are in these 
packages--doesn't that cause some concern for banks when the 
insurance companies decide that they are moving out, they are 
not going to insure? We find that if you can't get the 
insurance, you can't get the home, because the home has to have 
some level of insurance. Does that cause some concern for banks 
or should it?
    Ms. Gardineer. Congressman Green, of course, it does. We 
have a flood insurance rule, for example, that we have been 
dealing with for many years, and when we see changes like that, 
it does have an impact or the potential to have an impact on 
the financial institution that holds a mortgage.
    Mr. Green. Anyone else?
    Mr. Billingsley. No, I would agree. I think the issue you 
raise is how climate change can affect credit risk, and that is 
something we have been----
    Mr. Green. This is just one, but there are many others, and 
I think that is what we have to concern ourselves with, how 
this climate change impacts these mortgages, these underlying 
securities, and to the extent that they can impact the bank 
itself, and that is where you come in. Do you have any other 
examples?
    Mr. Gibson. We do see banks looking at how climate-related 
financial risks affect their own loan portfolios or their 
business models, so banks are looking at those risks, yes.
    Mr. Billingsley. No, I would agree with Mike. It could also 
impact things like operational risk as well.
    Mr. Green. Say again?
    Mr. Billingsley. It could impact things like operational 
risk as well.
    Mr. Green. Operational risk? Okay.
    Ms. Gardineer. Congressman, I do think that when we issued, 
jointly, Principles for Climate-Related Financial Risk, it is 
precisely because we wanted to focus on risk management because 
of the increased frequency of weather-related and extreme 
weather on operational risks, supervisory issues, and the true 
impact it has on communities and individuals across the 
country.
    Mr. Green. Okay. Understanding that we have these risks, 
what is it that you can do to assure us to some extent--you 
can't guarantee--that banks will be in a position to deal with 
these risks that climate change will impose? What do you do?
    Mr. Gibson. We make it clear to banks that we expect them 
to measure and manage all of their material risks, including 
the climate-related financial risks that you are talking about, 
and we have the interagency guidance that was mentioned that 
has some principles around that.
    Mr. Green. Do you also concern yourself with how well they 
are capitalized?
    Mr. Gibson. There is no direct link from climate-related 
financial risks to capital requirements, but certainly, when 
banks are evaluating their own risks, they need to know whether 
their capital is sufficient for the risks they are taking, 
which would include all of their material risks.
    Mr. Green. But if the climate change impacts the underlying 
assets and the securities, does that not impact the financial 
market in some way?
    Mr. Gibson. Yes, and we are seeing investors who purchase 
those securities, and they will be trying to understand their 
risks, which are very targeted to the risks that they are 
investing in. So, it is possible that climate-related financial 
risks could be important for a particular security, and we see 
investors paying attention to that.
    Mr. Green. Thank you very much. I yield back, Mr. Chairman. 
Thank you.
    Mr. Barr. The gentleman yields back. I now recognize myself 
for 5 minutes.
    Director Gibson, the Basel Committee sets international 
capital and liquidity standards that the Fed uses as the basis 
for domestic regulations. Section 11(k) of the Federal Reserve 
Act, which you know very, very well, provides that, ``The Board 
of Governors may not delegate its functions to a Federal 
Reserve Bank for the establishment of policies for supervision 
and regulation,'' but the Federal Reserve Bank of New York is a 
member of the Basel Committee, as is the Federal Reserve Board 
of Governors.
    How does the Federal Reserve reconcile delegating to the 
New York Fed the ability to be a member of the Basel Committee, 
which establishes supervision and regulation policies that 
become incorporated into Board regulatory and supervisory 
policies, with Section 11(k)of the Act, which says that the 
Board may not delegate to a Federal Reserve Bank its functions 
for the establishment of supervision and regulation policies?
    Mr. Gibson. When the Board and the New York Fed participate 
in the Basel Committee, we are coordinating closely. We are not 
delegating anything, and we work together, and the Reserve Bank 
staff provide a lot of value. They have a lot of technical 
expertise.
    Mr. Barr. When you and the New York Fed are participating 
in the Basel Committee, do you represent the United States, or 
are you just participating in an international standard-setting 
exercise?
    Mr. Gibson. We are representing our agencies, and we are 
representing the United States.
    Mr. Barr. And U.S. energy companies that are fossil energy, 
carbon-emitting companies, do you have their interests in mind 
when you are there in Basel? The shareholders of fossil energy, 
carbon-emitting American companies, do you have their interests 
in mind?
    Mr. Gibson. We have our statutory responsibilities around 
bank supervision and safety and soundness in mind.
    Mr. Barr. Yes, and when European standard-setters ask you 
to pressure banks to disinvest in or de-bank fossil energy 
companies, what do you say to them?
    Mr. Gibson. I would say that we don't direct banks to lend 
to any particular customer. That is the bank's decision.
    Mr. Barr. And American shareholders who depend on the 
profitability of fossil energy companies, what do you say in 
defense of them when you are in the Basel Committee?
    Mr. Gibson. Again, in the Basel Committee, we are 
representing our statutory responsibilities for bank 
supervision and safety and soundness.
    Mr. Barr. Do you ever raise the issue of energy reliability 
and energy affordability in the context of these conversations 
at Basel?
    Mr. Gibson. That is not a main topic of the Basel 
Committee. We talk about----
    Mr. Barr. You don't talk about that? You don't talk about 
the reliability of the American energy grid? You don't talk 
about energy affordability or shareholder returns for American 
energy companies when you are there?
    Mr. Gibson. That is not the focus of banks' supervision 
and----
    Mr. Barr. What is the focus?
    Mr. Gibson. Banks' safety and soundness, and a strong 
economy and a strong banking system.
    Mr. Barr. Yes, and are banks more sound when they don't 
have good credit with energy companies?
    Mr. Gibson. Banks need to manage their credit risk with 
respect to all of their borrowers.
    Mr. Barr. Yes. Director Gibson, in one of our subcommittee 
hearings last year, you said that you did not know about the 
funding for the Network for Greening the Financial System 
(NGFS). Have you had a chance to look more closely at NGFS 
funding, and if so, whether you think that with activist 
funding of research, that the NGFS at the Federal Reserve Board 
is still comfortable with the Board's participation in these 
NGFS meetings?
    Mr. Gibson. I have looked more into the NGFS funding. What 
I can tell you is that the NGFS is supported by voluntary 
contributions of the NGFS members and observers. However, 
external funding can also be provided to support projects 
commissioned for the benefit of the NGFS. The NGFS charter 
states that such contributions do not confer the contributor 
any right to define the priorities or influence the NGFS's 
work, and, of course, we do not contribute funding to the NGFS 
from the Federal Reserve.
    Mr. Barr. We are very obviously worried about the influence 
from who funds it. Director Gibson, can you describe the 
Climate Data Committee, including the Climate Data Hub, and the 
joint work with the Financial Stability Oversight Council's 
(FSOC's) Office of Financial Research's Climate Data and 
Analytics Hub over at Treasury? It seems like there is a lot of 
obsession with climate at the Fed.
    Mr. Gibson. I can't speak for the FSOC or the Treasury, but 
in terms of the Federal Reserve, we do have a staff group that 
is looking at climate data and what might be investments----
    Mr. Barr. My time has expired, but we need patriotism. From 
our participation in international bodies, we need promotion of 
American energy dominance. We don't need yielding to European 
climate obsession. I yield back.
    The gentleman from California, Mr. Vargas, is recognized.
    Mr. Vargas. Thank you very much, Mr. Chairman. Nice speech, 
but I would say what we really need to take a look at is the 
soundness of banks. That is what we are talking about here 
today, and I think banks are much more sound when they don't 
put their head in the sand, and take a look at what is 
happening nationally and internationally. There is climate 
change. Even the Republican witnesses who come up here, when I 
ask, do you believe in climate change, even they raise their 
hands. When I first got here, none of them would. Now, they do. 
Of course, it is happening. How could you possibly predict a 
run on the bank with climate change?
    You know what? If you have a local bank in Florida that is 
heavily invested in the real estate market there with 
mortgages, and you are invested in that bank or you have your 
money in that bank, and the first hurricane comes through--it 
is not even a Category 4, now it is a 5; they are creating new 
numbers now because these hurricanes are so large because of 
climate change--Hell yes, you want to get your money out of 
that bank. Is that bank going to be sound? No, and of course, 
it is going to impact what you do. It is ridiculous. It is a 
nice speech when they say, ``patriotism,'' the coal companies 
and all this. It is B.S, climate change is happening, and I am 
not against energy companies. I think it is important to 
support energy companies, but at the same time, we are talking 
about banking here and insurance.
    I was in insurance for a while, and I have to tell you, one 
of the things that they do is they take a look at what are real 
risks, and they take a look at Florida, and they take a look at 
California and other places. They know that because of climate 
change, it is becoming much more expensive to insure there, and 
they can't get the price that they need, so either they are 
pulling out or they are shrinking. They are not stupid, and of 
course that is why you are taking a look at this. As bankers, 
you have to. There are real risks; climate-related risks are 
real risks.
    Somehow, my friends on the other side think that they are 
made-up risks. They are imaginary risks. Ask that to the people 
in Texas, we talk about the hurricanes, the people in Florida, 
or the fires in California. See how imaginary they are. Anyway, 
I will shut up now. I had my speech just like the other side. I 
just want to make sure I said that because it is so ridiculous.
    By the way, it was the same thing with Dodd-Frank. When I 
got here, Dodd-Frank was the boogeyman. Dodd-Frank was bad. 
Now, it is the gold standard. Why are we going to Basel III? We 
have Dodd-Frank. It is so great. I do have some problems with 
Basel III, but I do want to say this: When we go and 
participate in these international organizations, are they 
dictating to us what to do? I think you have already testified 
no, right? Dr. Gibson, why don't we go to you first?
    Mr. Gibson. No. Nothing that is discussed in the 
international groups we participate in is binding on the 
Federal Reserve.
    Mr. Vargas. Yes, and the things that you talk about there, 
are they sneaky, nobody knows about them, and somehow they pop 
up, and then we have to enforce them here? Does that happen 
like my friends on the other side seem to be intimating?
    Mr. Gibson. The groups we participate in, like the Basel 
Committee, publish their work plan annually, they publish 
summaries of the meetings, so the topics are in the public 
domain that they are discussing.
    Mr. Vargas. Yes. In fact, we get them in our office. We get 
to see these things. I don't know why they don't get them over 
there on the other side. It seems pretty ridiculous to me. Now, 
I should ask you, because I do ask everybody, so I think it 
would only be fair, do you believe in climate change? If you 
could raise your hands?
    [Hands raised.]
    Mr. Vargas. Okay. Thank you. That's pretty consistent now 
with what we have had, and, again, I think it is very important 
to do that. And the last thing I would say is this: There seems 
to be this notion that we shouldn't rely on professionals 
anymore, that somehow the politicians will get it right, and we 
should listen to what we say so much and not let you do your 
job. And maybe that is the anti-elitist fever and fervor that 
we hear, but let professionals do their job. If I need an 
operation, I am not going to let some kook operate on me; I 
want a doctor, someone who knows what they are doing. I want a 
professional to do that, and you guys are professionals. I hope 
they let you do your job.
    Again, I appreciate the work that you have been doing. I 
had a whole speech here, asking a whole bunch of other 
questions. Sometimes, they get my goat because of this whole 
climate-related imaginary thing, which is ridiculous. It is 
real, it is happening, it is big, and it is very problematic, 
and I am glad you all are taking a look at it. And with that, I 
will yield back, Mr. Chairman. Thank you.
    Mr. Davidson. [presiding]. I thank the gentleman. I now 
recognize myself for 5 minutes for questions.
    For a lot of my constituents back home, they will be 
sitting here watching this hearing, dozens of them, wondering 
what in the world has Basel, Switzerland, got to do with banks 
in America? Why do these globalist bankers keep going to Basel, 
Switzerland, and why do they make rules from these meetings in 
Basel and come to us? Why should we pay so much attention to 
Basel?
    Could you explain it to us, Dr. Gibson, what goes on in 
Basel and why it is important?
    Mr. Gibson. In the Basel Committee, we are participating to 
support our statutory responsibility domestically for 
supervision and regulation and financial stability----
    Mr. Davidson. Our FSOC is supposed to submit to whatever 
happens in Basel?
    Mr. Gibson. Nothing that is agreed upon in Basel or 
developed there is binding, and we make decisions based on our 
domestic statutory mandates.
    Mr. Davidson. Under Dodd-Frank, under all bank regulations, 
so it is not really a treaty. It is just kind of this consensus 
that we should gather together regularly in Basel, Switzerland, 
and talk about the global financial markets and try to create 
some sort of stable international financial system.
    Mr. Gibson. Having common standards helps the global 
financial system because U.S. firms that want to operate abroad 
have rules that they are familiar with, because we have a 
somewhat harmonized----
    Mr. Davidson. There is nobody from Basel making us do this. 
We are in a sense doing it to ourselves, right?
    Mr. Gibson. We participate voluntarily, yes.
    Mr. Davidson. Okay. I just wanted to be clear on that. 
Yesterday, our Housing and Insurance Subcommittee held a 
hearing on housing affordability in America, where we discussed 
the many issues homebuyers are facing in the current market. 
One issue we discussed briefly and I wanted to save for today's 
hearing is the clear impact the proposal on Basel III capital 
requirements is going to have on homeownership in America, 
especially for low- to moderate-income borrowers, and 
especially for our rural, minority, and first-time homebuyers 
across the country. Mortgages issued to these borrowers would 
require a risk weighting of 70 percent versus 50 percent, so a 
pretty big increase.
    What is very clear is that as a result of this 20-percent 
increase in the risk-weighted capital requirement for low- to 
moderate-income (LMI) mortgages, lenders will be forced to 
decrease their lending to these borrowers. Because of Basel III 
Endgame, fewer mortgages will go to rural communities. Fewer 
mortgages will go to minority borrowers. Fewer mortgages will 
go to hardworking Americans who want to buy their first home. 
The Basel III Endgame will definitely make homeownership in 
America more expensive and the housing affordability worse 
unless it is reworked. I will say that the Chairman of the 
Federal Reserve gave us some hope. Although he seems very 
committed to it, he seems to be open to reworking it.
    As we looked through this, I was reviewing several speeches 
and interviews that the Chairman of the Basel Committee has 
given in the last month, and he asserted that the Basel members 
are expected to have the outstanding standards implemented by 
the end of the year. Director Gibson, does that sound right to 
you, by the end of the year?
    Mr. Gibson. I would say the timing is uncertain, because we 
are reviewing all of the comments that we received, and we will 
have to analyze all of those comments.
    Mr. Davidson. This is also encouraging. When I hear folks 
in your position, or people like the Chairman of the Federal 
Reserve say, we may have to rework some things, that is 
essentially like what people back home might do screaming, it 
is a total disaster. We are going to have to fix it. So, I take 
it as good news because we know we have to fix it.
    Director Gibson, do you think that a robust public 
engagement, following the Administrative Procedure Act (APA), 
will ensure that whatever new capital requirements are fit for 
purpose for America's financial institutions?
    Mr. Gibson. Yes. That is the process we will do, and that 
is the goal we have.
    Mr. Davidson. For others on the panel, any other concerns 
about the impact of Basel III on homeownership or the ability 
for people to get a mortgage in America due to some consensus 
in Basel?
    Mr. Billingsley. Yes. The issue you raise is probably one 
of the most prominent comments we have received, so I view it 
as critically important to get it right.
    Mr. Davidson. Yes. I will just share from my personal 
experience as we look at the impact on small and mid-market 
firms as well. Public companies, big companies have access to 
the bond market. But for small and mid-market firms, their 
ability to access financial capital in America largely goes 
through banks. So, who is getting crippled? It is Main Street 
businesses over Wall Street companies. These are the businesses 
that dominate Southwest Ohio and a lot of America, a lot of 
where the jobs are. The ability to grow these businesses is 
hamstrung when you have globalist bankers come away from 
Switzerland and say, we are going to clamp down on lending. And 
it doesn't just hit homeowners, it hits businesses, and it 
hurts the growth rate in our whole economy. So, I hope it is 
very strongly reworked.
    My time has expired, and I now recognize the gentleman from 
Illinois, Mr. Casten, for 5 minutes.
    Mr. Casten. Thank you, Mr. Chairman. And thanks to all of 
our witnesses. I think this has been a genuinely fascinating 
hearing. I just think it is mistitled, and I don't mean that to 
be sassy. I say that because I think the appropriate title for 
this hearing is how is it that the Republican Party, the party 
of Reagan, has become so uncomfortable with global leadership, 
and I am not just saying that to cast aspersions. The Chicago 
Council on Global Affairs, a wonderful organization in Chicago, 
just did a survey they released last month that said that for 
the first time in nearly 5 decades, a majority of Republicans 
said that the United States should stay out, of rather than 
play an active role, in world affairs.
    We are going to leave Congress this week, for 2 weeks, 
without even bringing a bill to the House Floor to provide aid 
to our friends in Ukraine to stand up to Vladimir Putin. It 
doesn't seem like that long ago that the leader of the 
Republican Party was saying, ``Tear down that wall, Mr. 
Gorbachev.'' Now, nobody wants to stand up to him. I can't find 
a single member of the Republican Party who is willing to 
suggest that someone who seems to have a fetish with the leader 
of North Korea, and is publicly refusing to support the United 
States obligations under Article 5 of NATO, to even say that 
might be problematic.
    And of course, yesterday, we had the Heritage Foundation in 
here, who has played a role in creating Project 2025, a 
conservative blueprint for the next Republican President, which 
suggests that the Treasury Department should withdraw from the 
World Bank, withdraw from the International Monetary Fund 
(IMF), and the Commerce Department should pull out of the 
Organisation for Economic Co-operation and Development (OECD) 
and terminate any program that even references the Paris 
Climate Accord.
    I guess my first question for you all is, do you believe 
that the United States should withdraw from international 
financial institutions and cede leadership to everybody else in 
the world? Does anybody agree with that proposition?
    [No response.]
    Mr. Casten. Good. Thank you. I am glad your organizations 
have done that. FDIC Chair Gruenberg recently said that climate 
change should not be viewed solely as a long-term threat, that 
weather events are already influencing insurance costs. We know 
that. Mr. Vargas has said that. It is affecting financial 
markets.
    Dr. Gibson, these are simple questions. But isn't it 
beneficial for the United States to actually sit at the table 
and collaborate with our international climate counterparts to 
minimize climate risks, to understand them?
    Mr. Gibson. Yes. We work with our international 
counterparts to support our statutory mandates.
    Mr. Casten. And shouldn't we be collaborating with regional 
banks, and other central banks, making sure that we are working 
in lockstep with them?
    Mr. Gibson. We do collaborate with other central banks, 
yes.
    Mr. Casten. Given the choice, would you like the United 
States to be in a leadership role at those tables or not at the 
table at all?
    Mr. Gibson. We do play a leadership role in a lot of these 
groups, yes.
    Mr. Casten. Thank you. Ms. Gardineer, do you agree that 
climate risks are global and will affect all entities, sectors, 
and economies?
    Ms. Gardineer. Yes, Congressman, I do.
    Mr. Casten. Wouldn't banks with a global footprint actually 
benefit from having the United States at that table instead of 
leaving U.S. multinational companies to wait and sit there and 
have to do the bidding of whatever other international 
sovereign nation sets those rules?
    Ms. Gardineer. It is really important for us to continue, 
and the value that we provide by having that collaboration with 
our global partners, I think, helps the United States and our 
financial system.
    Mr. Casten. I come back to what I said at the start. It is 
fascinating that this sounds like such a partisan exchange, 
that you all are answering such simple questions with simple 
obvious truths, and I have sympathy for all of my colleagues 
across the aisle. I don't know what I would do in their shoes. 
If my ability to hold this job depended on appealing to that 
small minority of Americans who do not believe that the United 
States should lead, but make up the majority of the Republican 
primary electorate. I get it, leadership is hard, but following 
people is the opposite of leadership. I thank you all for your 
leadership, I thank you for doing the right thing, and I hope 
that people who find leadership hard, find more satisfactory 
jobs than being a part of the leadership of the United States. 
Thank you, and I yield back.
    Mr. Davidson. I thank the gentleman. The gentleman from 
Georgia, Mr. Loudermilk, is now recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman, and I want to 
thank all of our witnesses for being here and representing your 
respective agencies.
    Dr. Gibson, last year, I asked you some questions about the 
processes of developing the Federal Reserve's Pilot Climate 
Scenario Analysis (CSA), and the sources of its funding. At the 
time, you didn't know, but I also understand Representative 
Barr asked this question earlier, and from what I understand, 
you told him that the NGFS was funded partly by voluntary 
contributions from member banks. Is that true?
    Mr. Gibson. Voluntary contributions from its members, which 
are central banks or supervisors, but they do accept external 
funding for certain projects that they run.
    Mr. Loudermilk. Okay. Since I wasn't physically in here, I 
want to make sure of those. Now, let me do a follow-on question 
on that. Do any U.S. bank supervisory agencies voluntarily 
contribute to the NGFS?
    Mr. Gibson. The Federal Reserve has not.
    Mr. Loudermilk. But you are not sure of any others?
    Mr. Gibson. I wouldn't want to speak for the others.
    Mr. Billingsley. The FDIC does not either.
    Mr. Loudermilk. Okay.
    Ms. Gardineer. The OCC does not.
    Mr. Loudermilk. Okay. Thank you. I just want to make sure 
that was clear.
    On to another question. Dr. Gibson, as the Director of 
Supervision and Enforcement at the Fed, do you think it is 
important that you know what assumptions are being made to 
support the proposals that come out of your division?
    Mr. Gibson. Yes.
    Mr. Loudermilk. Okay. In the participant instructions for 
the Pilot CSA, there were 75 references to the NGFS. In the 
instructions, the Fed asked banks to examine trajectories for 
climate and economic outcomes under hypothetical trajectories 
provided by the NGFS. Now, the Fed claims to have used NGFS 
trajectories because, ``these trajectories are considered 
plausible and illustrative scenarios and do not have 
probabilities attached to them.'' How did you evaluate whether 
these trajectories were plausible and what measure of 
plausibility was used?
    Mr. Gibson. When we were constructing the Pilot Climate 
Scenario Analysis, we considered the question of what scenarios 
to use and asked the banks to look at it. And we did, in those 
cases that you mentioned, decide to use scenarios that were 
produced by the NGFS, mainly because the banks were already 
familiar with them, so that would be the least-burdensome way 
to go about the exercise.
    Mr. Loudermilk. But was there a particular measure of 
plausibility other than what you have just described?
    Mr. Gibson. Our technical experts evaluated them and were 
comfortable, yes.
    Mr. Loudermilk. When did the Fed believe it was important 
that these scenarios do not have probabilities attached to 
them?
    Mr. Gibson. In our view, the scenarios that we were using 
for the Pilot Climate Scenario Analysis--I don't think we know 
enough to attach probabilities to them, and the purpose of the 
exercise was not to attach probabilities to them. The purpose 
of the exercise was to give banks a chance to evaluate those 
scenarios and look at how they are evaluating those risks and 
their risk management around climate-related financial risk.
    Mr. Loudermilk. But without any probabilities?
    Mr. Gibson. Without a probability attached.
    Mr. Loudermilk. Does the Fed formally endorse these 
scenarios as a supervisory standard when evaluating banks' 
adherence to the joint climate risk guidance issued last year 
by the Fed, the FDIC, and the OCC?
    Mr. Gibson. No. I would say these are not the scenarios 
that we would use as a standard.
    Mr. Loudermilk. Okay. A recent Basel Committee regulatory 
consistency assessment report says that U.S. agencies have 
adopted a stricter approach than the minimum standards 
prescribed by the Basel Committee. The stricter rules have not 
been considered as mitigants for the overall component level 
assessment of compliance.
    Dr. Gibson, is it correct that when U.S. standards are 
stricter than BCBS recommendations, the U.S. does not receive 
credit for those standards under the Basel Committee's rating 
scheme?
    Mr. Gibson. It is true that when the Basel Committee looks 
at countries' regulations, they are only looking for 
differences in the downside direction. They are not evaluating 
the differences in the other direction.
    Mr. Loudermilk. Okay. So if the U.S. doesn't receive credit 
for stricter standards, why exceed those standards?
    Mr. Gibson. We get a lot of benefit from having standards 
that are appropriate for the U.S., whether or not they are 
identical to Basel standards.
    Mr. Loudermilk. Okay. I see I am short on time, so I yield 
back.
    Mr. Davidson. I thank the gentleman. The gentleman from 
Illinois, Mr. Foster, is now recognized for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman, and, again, to our 
witnesses. Many of you have mentioned the fact that the U.S. is 
often a leader in these international discussions. Why do you 
believe that the U.S. is a leader, or at least first among 
equals in these discussions? Is it the size of our GDP or the 
primacy of the dollar or our leadership in advanced 
technologies or just the expertise we have in certain areas? Is 
it explicitly written into the bylaws of these groups that the 
U.S. should have a leading role in these, or is it just de 
facto, because in a number of ways, we are the big dog in the 
international economy?
    Mr. Billingsley. I suppose I can start. For me, I think it 
starts with the FDIC's mission, so I will give you an example. 
The International Association of Deposit Insurers is an 
international organization we are involved in, and it is fair 
to say that the rest of the world looks to us as the premier 
way to do that, so I think that is a particular area where we 
are the social leadership.
    Mr. Foster. Yes. Are there areas you are aware of where 
other countries or other areas may have more expertise in 
international trade?
    Mr. Gibson. I would say one of the things we bring to the 
table is we have a high capacity for research and data analysis 
and that supports our engagement in these international groups, 
and it is often a way to move the international consensus to 
provide good data and arguments. I would say that is a strength 
of the U.S. participation.
    Ms. Gardineer. I would add to that the expertise that we 
have across all of our agencies at the OCC. We do have, I 
think, the perspectives of the largest globally-active 
institutions down to some of the smallest community banks, and 
that purview gives us a lot of leadership capability to take to 
these international forums.
    Mr. Foster. Now, another area where we might gain from 
engagement with other countries is when you see failures that 
occur in other countries. There was this famous incident with 
the deepfake impersonation on some sort of Zoom that caused a 
$25-million erroneous transfer. I believe that happened in Hong 
Kong, if I am right, so there are lessons to be learned there. 
The biggest G-SIB that has failed, the only one since Dodd-
Frank, was Credit Suisse, so there may be lessons there from 
which we can benefit. We are only 5 percent of the population 
of the world, and there are lots of ways that financial 
institutions can mess up that might be discovered earlier in 
other countries. Are there examples you can think of where we 
really gained a valuable lesson from experiences offshore?
    Mr. Gibson. Just to give one example, the Basel Committee 
was founded 50 years ago because of the failure of a German 
bank that caused losses to U.S. banks through the foreign 
exchange market. And that was really the impetus for more 
international cooperation about what are cross-border banks 
doing and do we understand and supervise their risks 
adequately. That spurred more international cooperation because 
of the failure of a German bank.
    Mr. Foster. And have there been disasters averted that you 
can point to because of the understanding and this 
standardization, at least to some extent, of our approaches to 
different financial threats?
    Mr. Gibson. I would say that the fact that we have had 
strong regulatory standards in the U.S. has been a source of 
strength for our banking system and our economy. I can't point 
to particular banks where, because we did this, a bank didn't 
fail, but overall, I think we have a strong system.
    Mr. Foster. Yes. I came onto this committee in March of 
2008 when the roof was about to cave in, and began educating 
myself about things. I was pointed to the Canadian banking 
system, which was stodgy and overcapitalized at the time. But 
then when the crisis hit, being over capitalized went from 
being something that would be a source of derision to something 
that made the Canadian banking system the envy of a lot of 
countries, including some in the United States. And I believe 
that there is a lot to be learned from looking at the other 95 
percent of humanity.
    Historians say there are two basic ways for countries to 
fail, one of which is to seal themselves off from the rest of 
the world, and pretend like they know all the answers. The 
other one is to just have an extractive elite that sort of 
benefits the incumbents and preserves their economic and 
political power. There are a lot of both of those strands in 
this hearing, and I think to maintain our strength, we have to 
keep ourselves open to the world and particularly open to the 
world's ideas, and I thank you for your work in that regard. My 
time is up. I yield back.
    Mr. Davidson. I thank the gentleman. The gentleman from 
South Carolina, Mr. Norman, is recognized for 5 minutes.
    Mr. Norman. Thank you, Mr. Chairman. As a follow-up, I will 
take Mr. Luetkemeyer's questions about the involvement with 
Chinese and Russian banks as far as Basel. Mr. Gibson, did I 
hear you right that the climate risk didn't affect any of its 
safeguards that Basel tries to implement--market risk, capital 
risk, operational risk?
    Mr. Gibson. When we think about climate-related financial 
risks, we ask banks to think about the ways that they could 
manifest through all of those traditional channels, so that is 
the way we would look at it.
    Mr. Norman. Okay. I think he asked this. Could you give me 
one climate risk that the banks are facing now of which they 
need to be aware? Give me an example. Is it forest fires? Is it 
hurricanes? Give me one example.
    Mr. Gibson. We did run this Pilot Climate Scenario Analysis 
last year that asked six large banks to look at, among other 
things, the scenario of a large hurricane hitting the East 
Coast and how that would affect their loan book. So, that is 
one example that banks have looked at.
    Mr. Norman. Mr. Billingsley?
    Mr. Billingsley. Yes. One good example is just the cost or 
availability of insurance, so that could impact the credit risk 
of an institution.
    Mr. Norman. Give me one climate risk that man can control, 
that would affect the banks and the Basel as far as the 
regulations and recommendations, and, as our friend from 
Georgia mentioned, there is no probability that is put with it.
    Mr. Billingsley. Right. I will agree with Mike that it is 
difficult to assign probabilities, but I think it is our job to 
assess all material risks, including ones where we can't assign 
probabilities.
    Mr. Norman. All three of you raised your hands about 
climate risk. What if a bank just gave you one sentence: ``We 
are not going to make allowances unless you define further with 
a probability of a climate risk.'' What would be the 
consequences?
    Ms. Gardineer. What we have done, Congressman, is look at 
climate-related financial risks, and looking at that and the 
impact it could have on all of the risk, like credit risk, 
operational risk, market risk, et cetera. Risk management is at 
the core and our safety and soundness is the focus of what we 
are looking at when we look at climate-related financial risk.
    Mr. Norman. But what would be the consequences of a bank 
that did that?
    Ms. Gardineer. I think if they were unable to manage their 
risk appropriately, our examiners would take normal courses of 
action to help them manage the risk to prevent any adverse 
consequences that could befall the bank or the communities.
    Mr. Norman. But Basel can't come up with a firm example of 
a climate risk. If it is a hurricane, if it is a forest fire, 
put a probability on that and how that directly affects the 
banks.
    Ms. Gardineer. I don't----
    Mr. Norman. But you all raised your hands that this is a 
real crisis, and I guess I am just trying to further drill down 
to see exactly what, and for the money and time that you are 
requiring by the banks because they are going to suffer the 
consequences. I think the foreign banks are going to laugh at 
it. Mr. Luetkemeyer mentioned the involvement of China and 
Russia from a national security standpoint. I don't think they 
are our friends, having all the information from our financial 
records that you all have provided them, but I guess I am just 
trying to ask again about the climate risk, what are the 
foreign countries saying about your regulations and the 
consequences?
    Mr. Gibson. When we engage with our international 
counterparts in talking about climate risk, many of them have a 
lot more active policies than we do.
    Mr. Norman. Which country?
    Mr. Gibson. All of the other countries, pretty much.
    Mr. Norman. China?
    Mr. Gibson. I would say Europe stands out as being very 
active on climate risk, in my experience.
    Mr. Norman. What about China and Russia?
    Mr. Gibson. Not in my experience, no.
    Mr. Norman. Zero. They laugh at it.
    Mr. Gibson. Russia doesn't participate in the Basel 
Committee anymore.
    Mr. Norman. What about China?
    Mr. Gibson. They participate. But I would say on the topic 
of climate risk, we are really in the early stages of learning 
what are the links from climate change to the risks that banks 
have on their balance sheet. That is why we are trying to build 
the capacity to understand that better, and banks are building 
that capacity as well.
    Mr. Norman. I yield back.
    Mr. Davidson. I thank the gentleman. The gentleman from 
Pennsylvania, Mr. Meuser, is now recognized for 5 minutes.
    Mr. Meuser. Thank you, Mr. Chairman. And thank you very 
much to the witnesses. A little earlier, we had a colleague 
making a very sanctimonious speech, which really doesn't make 
it in the real world and shouldn't here. I am not sure if my 
colleague understands that the United States--or knows his 
history--has done far better than the economies that we are 
trying now to collaborate with, as he put it, or to fall in 
lockstep. Leadership is not defined as falling in line with 
other weaker economies and bad ideas, and embracing Basel III 
is somehow described as leadership? No. No. Making Basel III 
better and forging a better path is leadership, and that is 
what we are trying to do.
    Not only that, every bank, every business that you speak 
to, large and small, has a problem with Basel III, the biggest 
banks in the country as well as very small community banks that 
come and see me. So, embracing Basel III Endgame is somehow 
leadership, and not falling in line is sanctimonious at best, 
and I find it very, very politically motivated because it 
doesn't make any sense coming from a fellow Member.
    Anyway, we have a concern about the preservation of U.S. 
business sovereignty, and in the development and adoption of 
international standards. We want to have our say, and it 
doesn't seem like we do when it comes to Basel III and many 
other rules that are being made.
    Mr. Gibson, how do your regulatory organizations prioritize 
U.S. business sovereignty and standards amidst the growing 
influence of international regulatory bodies on our financial 
regulations, such as the Corporate Sustainability Directive 
(CS3D) and other global paths, that the U.S. seems required to 
follow by your regulators?
    Mr. Gibson. When the Federal Reserve participates in 
international groups, we are supporting our statutory 
responsibilities around supervision and regulation and 
financial stability, and we are working to shape those 
standards and recommendations to the needs of the U.S. 
financial system. But the standards in those groups aren't 
binding, so we take decisions on our domestic mandates 
according to our domestic goals.
    Mr. Meuser. I don't know how many letters you got, and you 
couldn't even name one that was positive. I would love to see 
the positive letter, by the way, if that is at all possible. If 
that letter was from an actual stakeholder, I would love to see 
it, if you can produce that for this committee.
    How is CS3D in the interest of American small business, 
because EUR 150 million, you have to comply, not just in 
Europe, but in the United States of America. Have we ever heard 
such a thing before? I would like to ask you, Mr. Billingsley.
    Mr. Billingsley. Yes. Sure. Something like a CS3D is really 
sort of outside of the remit of the FDIC, so it is not 
something we are interested in. It is not something you will 
see come out of us. It is really a European thing.
    Mr. Meuser. Good, but according to Treasury Secretary 
Yellen, not necessarily. So that is a concern, and it seems to 
be a pattern to these global--how did he put it--
collaborations.
    Let me ask Comptroller Gardineer, please, how does the OCC 
balance international standards, from your perspective, of the 
U.S. banking system, ensuring U.S. businesses remain 
competitive?
    Ms. Gardineer. It gives us, Congressman, an opportunity, as 
we said earlier, to talk about raising standards, higher 
standards, and trying to ensure that there is a level playing 
field so that the U.S. financial system is not at a competitive 
disadvantage or losing market share to a more-lax jurisdiction 
that has lower standards or is leading a race to the bottom.
    Mr. Meuser. And maybe just for all of you, do we integrate 
in a sincere, important way industry feedback in these 
international discussions?
    Ms. Gardineer. Yes.
    Mr. Meuser. Okay.
    Ms. Gardineer. Yes, we do.
    Mr. Billingsley. Absolutely.
    Mr. Meuser. Okay. Thank you. I appreciate that, and, Mr. 
Chairman, I yield back.
    Mr. Davidson. I thank the gentleman. The gentleman from 
Wisconsin, Mr. Fitzgerald, is now recognized for 5 minutes.
    Mr. Fitzgerald. Obviously, we have discussed quite a bit 
about how the Basel proposal adopts legally-binding capital 
requirements originating from an organization that exhibits 
what in my estimation is no real legal authority. I have been 
particularly concerned with the proposals disincentivizing 
banks from offering conventional loans to first-time homebuyers 
and low- to moderate-income borrowers. This is an issue that I 
think if you are a Member of Congress, you are going to hear 
about continually when you are back in the district, and I 
think the lack of options will make buying a home even more 
unattainable than it already is today, certainly for 
Wisconsinites right now.
    Another major issue is the proposal's operational risk 
component requiring banks to hold capital against fee and 
commission income as a proxy for operational risk. Under the 
proposal, a Wisconsin manufacturer trying to ship products 
internationally would need to pay more to get a bank letter of 
credit in order to facilitate those shipments, ultimately 
leading to higher costs or reduced availability for its 
products. In kind of a similar fashion, foreign direct 
investment in Wisconsin could be negatively impacted due to the 
increased capital, and the burden associated with that capital 
on foreign banks helping facilitate investment in Wisconsin. 
These issues, I think, kind of highlight the lack of analysis 
on how the proposal could affect users.
    Mr. Gibson, Vice Chair Barr has promised more analysis on 
the final rule, but why not do this analysis up front to 
increase the likelihood of kind of a better final product, I 
guess you could say?
    Mr. Gibson. The notice of proposed rulemaking last year had 
an analysis of the impact, and we are doing more work during 
the comment period, and we got comments about the impact. We 
also did a special data collection during the comment period to 
be able to assess the impact, so we are going to take all that 
into account going forward.
    Mr. Fitzgerald. So, you are comfortable with the amount of 
information that is available to make those series of 
decisions, I guess, at this point?
    Mr. Gibson. We are doing more work during the comment 
period with the information from the comments as well as from 
the special data collection, so we will be providing more 
information in the future, yes.
    Mr. Fitzgerald. Okay. Members of the military are routinely 
subjected to deployments and kind of permanent changes of 
station and, therefore, more likely to have kind of longer 
periods of time when they don't use open credit lines, I guess 
is the best way to describe it. In fact, active duty and 
reserve military members are 30 percent more likely than the 
general public, within a 2-year period, to make a purchase 
using a credit card that hasn't had any activity in the last 12 
months.
    Under the Basel III Endgame proposal, off-balance-sheet 
items like unused credit card lines will be subject to an 
increased credit conversion factor applied to undrawn funds, 
reflecting the expected amount that could become an on-balance-
sheet exposure, I guess, at some point. Due to the proposed 
conversion factor, banks could be incentivized to reduce or 
close unused or dormant credit lines to reduce their capital 
requirements. Let me just ask you, along those lines, have the 
agencies adequately contemplated the unique effect that the 
proposed conversion factor would have, specifically on 
servicemembers and the military community and their overall 
credit score?
    Mr. Gibson, I don't know if you have a comment on that?
    Mr. Gibson. Just to say that we have received those 
comments through the public comment process, so we are going to 
be carefully evaluating those and looking at them, yes.
    Mr. Fitzgerald. And before I run out of time, the capital 
proposal from the Fed and other financial regulators would 
impose huge costs on regional and mid-sized banks with little 
to no trading books to adopt the governance and data processes 
related to the new market risk rule. This proposal, on top of 
the other recent regulatory proposals, is bound to lead to, I 
am sure, some type of consolidation to overcome the compliance 
burden on the rulemaking. Do you believe allowing more banks to 
grow through acquisitions so that they are able to compete with 
the existing large banks would benefit the current ecosystem? 
And are you all worried about kind of damaging the breadth of 
the banking system, which obviously is kind of a national 
asset, by promoting more concentration and fewer regional banks 
who serve communities directly?
    Mr. Gibson. I would say we benefit from having a banking 
system with a diversity of institutions, including large, 
regional, and community banks.
    Mr. Fitzgerald. Very good. Thank you. Mr. Chairman, I yield 
back.
    Mr. Davidson. I thank the gentleman. The gentleman from New 
York, Mr. Torres, is now recognized for 5 minutes.
    Mr. Torres. Thank you. In January 2022, Fed Chair Jerome 
Powell said, ``Capital and liquidity levels at our largest, 
most systemically important banks are at multi-decade highs.'' 
In June of 2023, Fed Chair Powell described the banking system 
as, ``very strongly capitalized.''
    In June of 2023, Treasury Secretary Janet Yellen said, 
``Our banking system is well-capitalized. There is adequate 
capital and liquidity in America's banking system.''
    Dr. Gibson, do you agree with those statements from the Fed 
Chair and the Treasury Secretary?
    Mr. Gibson. Yes.
    Mr. Torres. The Fed Chair's repeated reassurances about a 
well-capitalized banking system seems to flatly contradict 
Basel III's assumption of an undercapitalized banking system. 
What do you make of that contradiction?
    Mr. Gibson. The main objective of the Basel III Endgame 
proposal was to make capital requirements more risk-sensitive 
and more consistent and adequately reflect risk. That is the 
goal.
    Mr. Torres. Do you think the banking system is 
undercapitalized or sufficiently capitalized??
    Mr. Gibson. That is one of the things we are looking at 
through the comment period. We have gotten a lot of comments 
about that and we are going to evaluate it.
    Mr. Torres. Because Fed Chair Powell described it as very 
strongly capitalized, and the rhetoric from the Fed 
historically did seem to suggest that it is sufficiently 
capitalized, I ask myself, given the well-capitalized state of 
the banking system, are we fixing what ain't broken? What is 
the actual need for Basel III? A common refrain that I have 
heard about Basel III is that the United States must conform to 
European standards of banking, and I am wondering, where did we 
get this notion that the United States, as the financial 
superpower of the world, must conform to European standards of 
banking?
    As a U.S. policymaker, the most important question for me 
is not whether the U.S. banking system is acting in conformity 
with Europe's banking system. The most important question is 
whether the U.S. banking system is achieving the best possible 
balance between economic growth and financial stability. That 
should be the question that matters to all of you. And do you 
believe, as I do, that the end goal should not be the 
Europeanization of the U.S. financial system; the end goal 
should be the optimization of economic growth and financial 
stability?
    Mr. Gibson. Our goal is a strong U.S. banking system to 
support a strong U.S. economy.
    Mr. Torres. Do you agree that the goal should be the 
optimization of economic growth and financial stability?
    Mr. Gibson. Yes.
    Mr. Torres. Okay. And have you conducted a study aimed at 
determining the level of capital requirements that would 
produce the optimal amount of economic growth and financial 
stability?
    Mr. Gibson. The notice of proposed rulemaking last year 
included that information, and we have received a lot of 
comments about that and we are evaluating those.
    Mr. Torres. Have you conducted a study?
    Mr. Gibson. There were studies cited in the notice of 
proposed rulemaking----
    Mr. Torres. But has the Federal Reserve itself conducted a 
study to determine what level of capital requirements would 
produce the optimal amount of economic growth and financial 
stability? It is a simple yes-or-no question.
    Mr. Gibson. Yes, and it was cited in the proposal last 
year.
    Mr. Torres. Okay. You did conduct a study?
    Mr. Gibson. It is in the proposal.
    Mr. Torres. Okay. There are those who insist that Basel III 
capital requirements would have no impact on access to credit. 
The laws of economics tell us that there is no such thing as a 
free lunch, right? Nothing is free. Everything has a cost. Do 
you believe that Basel III is an exception to the laws of 
economics, that Basel III is somehow a free lunch that would 
have no impact on the availability of credit?
    Mr. Gibson. There are definitely costs and benefits.
    Mr. Torres. It would have an impact on the availability of 
credit. There are housing finance agencies that have expressed 
concerns about the impact of Basel III on the Low-Income 
Housing Tax Credit equity investments, 85 percent of which come 
from the banking system. There are housing organizations that 
have expressed concerns about the impact of Basel III on 
minority borrowers and LMI borrowers who disproportionately 
access mortgages with lower down payments and higher loan-to-
value ratios. Do you acknowledge that those are genuine 
tradeoffs?
    Mr. Gibson. Yes, and we have gotten a lot of comments on 
exactly those issues, and we are definitely going to carefully 
consider those as we work on the final rule.
    Mr. Torres. And you agree that an Act of Congress 
supersedes a Basel III recommendation. Is that fair to say?
    Mr. Gibson. Yes.
    Mr. Torres. So if there were a conflict between a 
congressional statute and a Basel III recommendation, the 
congressional statute should prevail, because there have been 
concerns that there is a conflict between Basel III's 
requirement for standardization and Congress' requirement for 
regulatory tailoring?
    Mr. Gibson. Any proposal we make would be evaluated by our 
lawyers to make sure it is consistent with the statutory----
    Mr. Torres. I see my time has expired.
    Mrs. Kim. [presiding]. I now recognize the gentleman from 
Nevada, Mr. Horsford, for 5 minutes.
    Mr. Horsford. Thank you to the Chair and to the ranking 
member, and thank you to our financial regulators for appearing 
before the committee.
    The U.S. banking system is not only the powerhouse of our 
economy, creating jobs and opportunities across the country, 
but it is also the envy of the world, drawing capital from 
across the globe. It is our interconnected and global economy, 
our prosperity, which is inherently tied to the stability of 
the world markets. American authority on the world stage and 
close coordination with our allies makes us all safer from 
foreign adversaries but also from catastrophic economic shocks. 
And yet, there are those in the hearing today who have 
continued to demand that we abandon our international partners 
regardless of the risk. Our nation is certainly not stronger 
because of their continued criticism of the United Nations, 
their constant threats to pull out of NATO entirely, or their 
attempts to undermine efforts that protect the global financial 
markets.
    While we have outpaced our peer nations in our recovery, 
there are still looming risks that we must be able to work 
cooperatively with other countries to mitigate. One of these 
looming risks to our global economy is the ever-present dangers 
presented by climate change. It is a common refrain that 
America cannot stop the catastrophic effects of man-made 
climate change on its own, and yet, here we are, as some of my 
colleagues advocate to further weaken our ability to garner 
international buy-in and to create a coalition large enough to 
tackle this very real problem.
    Our regulators and the Financial Stability Oversight 
Council established a committee specifically to advise on 
climate-related financial risk, but as this is a global issue, 
there is still more that we need to do to improve global 
monitoring and mitigation efforts. Banks and other companies 
are already hard at work dealing with the well-documented 
reality of climate-related financial risks because they already 
know that these risks are all too real.
    Dr. Gibson, what are the potential impacts on banks to 
carry out vital services like lending to small businesses, 
supporting minority communities, or to sector-wide stability, 
if climate change-induced risks are ignored?
    Mr. Gibson. We are looking to make sure that banks are 
evaluating all of their material risks, including climate-
related financial risks, and firms are looking at how climate 
change could impact their business models and their balance 
sheets. And as bank supervisors, we need to understand their 
operations and their risks.
    Mr. Horsford. Thank you very much for that answer, and I 
hope that we will all remember that the consequences of climate 
change will not be borne equally across the socioeconomic 
ladder. The safety and soundness of the global financial sector 
is crucial, but an equally important aspect of our continued 
coordination with international financial regulators is to 
reduce global regulatory arbitrage.
    Regulatory arbitrage arises when banks are able to escape 
jurisdictions with more-stringent regulations in favor of less-
stringent ones, and our efforts to minimize the possibilities 
for these actions are critical to ensuring that more work 
capital remains within our borders. Our participation in 
international agreements and leadership in global 
organizations, both of which are attacked by the legislation 
posted for today's hearing, allow us to encourage other 
countries to have strong safeguards similar to those found here 
in the United States.
    Mr. Billingsley, would you please discuss the effects on 
American competitiveness if we were to lose our global 
leadership in the financial sector and create an opportunity 
for increased instances of regulatory arbitrage?
    Mr. Billingsley. Certainly. I think the issue you raise is 
very important. The extent to which we can influence global 
minimum standards in a way that is in the best interest of the 
FDIC, that is in the best interest of the U.S. banking system, 
that makes the global financial system safer, I think that 
makes our banking system safer.
    Mr. Horsford. Just to close, I would like to reiterate to 
all of you that when we are participating in any of these 
international agreements, specifically around capital 
requirements, we must be conscious of the unintended impacts to 
segments of our population who have been traditionally excluded 
from the financial sector.
    Dr. Gibson, what processes does the Fed have in place to 
better understand and mitigate the effects of these regulations 
on communities of color or other marginalized communities?
    Mr. Gibson. We evaluate those impacts when we look at 
proposed regulations, and we have certainly received comments 
about that and we we evaluate them as part of our rulemaking 
process.
    Mr. Horsford. And I hope you will do the same as it 
pertains to Basel III, in line with the questions from my 
colleague, Mr. Torres. With that, I yield back.
    Mrs. Kim. Thank you. I now recognize myself for 5 minutes 
of questioning, and I want to thank all of the witnesses for 
being here today.
    I am all for U.S. participation in international bodies, 
and I see the importance and value in doing so. However, I also 
believe that involvement in global governance bodies does not 
mean financial regulators have a blank check to agree to 
international standards without properly consulting Congress. 
We need more transparency when U.S. financial regulators engage 
other countries on regulations that could reduce access to 
credit and capital for millions of American families and small 
businesses. Furthermore, our financial regulators should not 
constrain our global competitiveness by gold-plating 
regulations through proposals like the Basel III Endgame.
    I want to ask you, Director Gibson, would you agree that 
the Basel Committee on Banking Supervision's core goal is to 
harmonize regulatory standards across international 
jurisdictions?
    Mr. Gibson. Yes, as well as supervisory cooperation.
    Mrs. Kim. Yes. Sure. Since you agree, do you believe that 
the current Basel III Endgame proposal goes against the Basel 
Committee's goal, since our international peers are watering 
down their own standards while we are gold-plating?
    Mr. Gibson. The Basel Committee recognizes that each 
country has to take back the standards to their domestic 
context and make sure that what we do domestically is 
appropriate to our banking system and our economy. So, we do 
that process, and we don't just automatically copy it over.
    Mrs. Kim. Yes. To me, it seems that we are fragmenting 
international standards rather than harmonizing, which could 
lead to greater risk for our financial stability. I want to 
point to the recent BCBS Regulatory Consistency Assessment 
Programme report, which states, ``In the following areas, the 
U.S. agencies have adopted a stricter approach than the minimum 
standards proscribed by the Basel Committee. The stricter rules 
have not been considered as mitigants for the overall or 
component-level assessment of compliance.''
    So, I want to ask all three of you, our witnesses, is it 
your understanding that when the BCBS looks at the U.S. capital 
standards and their compliance with BCBS recommendations, 
stricter U.S. standards in some areas do not receive credit 
under the Basel Committee's rating scheme?
    Mr. Billingsley. I think that is generally true. The way 
the assessments typically work is they are identifying areas 
where a jurisdiction standard might be below the global minimum 
rather than above.
    Mrs. Kim. I want to hear it from you two, as well.
    Ms. Gardineer. I think that is an accurate statement.
    Mrs. Kim. Mr. Gibson?
    Mr. Gibson. Yes. The consistency assessments focus on 
deviations in the downward direction, not deviations in the 
upward direction.
    Mrs. Kim. Okay. I want to ask you, Senior Deputy 
Comptroller Gardiner, does Acting Comptroller Hsu monitor what 
OCC staff and officials are doing in their work with various 
global governance bodies such as the Basel Committee and NGFS, 
and are there regular reports on what staff and officials are 
doing and why they are doing it?
    Ms. Gardineer. Yes. The staff that participate in any of 
the global forums that we are members of, regularly report back 
to the Acting Comptroller to get his position for the agency as 
we continue. That is an ongoing communication.
    Mrs. Kim. Thank you. I have the same question about Chair 
Gruenberg's knowledge in monitoring what goes on with FDIC 
staff and officials at the global governance bodies. Deputy 
Director Billingsley, can you answer that?
    Mr. Billingsley. Absolutely. It is very similar to what 
Grovetta just stated. Anything we do at the staff level at any 
international engagement is done so with the direction of the 
Chairman.
    Mrs. Kim. And, Director Gibson, I have the same question 
about Chair Powell's or Vice Chair for Supervision Barr's 
knowledge in monitoring.
    Mr. Gibson. Both Chair Powell and Vice Chair for 
Supervision Barr sit on the Basel Committee's governance body, 
and the staff will be briefing Vice Chair for Supervision Barr 
on what is going on in the meetings and also to Chair Powell 
when it rises to that level.
    Mrs. Kim. Thank you. I know my time is up. The gentleman 
from North Carolina, Mr. Nickel, has joined us, so I will 
recognize him for 5 minutes.
    Mr. Nickel. Thanks so much to our witnesses for being here. 
I would like to talk about the dominance of the U.S. dollar 
across the globe. The dollar is the world's dominant reserve 
currency, which has significant advantages for the United 
States. Because other countries hold and use dollars for 
international trade, reserves and investments, the dollar is 
always in high demand, and the U.S. is able to pay less to 
borrow money because of it. American businesses and consumers 
can enjoy lower interest rates and easier access to foreign 
markets. Unfortunately, given China's growth, there are already 
challenges to the dollar's influence. The dollar's share of 
official reserves fell to a 20-year low of 58 percent in the 
fourth quarter of 2022. We cannot afford to risk losing the 
economic and political benefits of the dollar's dominance. 
Loans will be more expensive for the government, businesses, 
and for the working families I represent in North Carolina's 
13th district.
    The dollar's unique status also enables us to influence 
global economic policies and maintain a significant role in 
international financial institutions. U.S. regulators are 
engaged in critical international conversations about cross-
border payments. The G20 released a roadmap for enhancing 
cross-border payments to make them faster, cheaper, and more 
transparent while maintaining safety and security. I believe 
that the U.S. must be at the table for these talks to advocate 
for our interests, such as maintaining the dollar's role as the 
global reserve currency.
    The Financial Stability Board, or FSB, is the international 
body that coordinates the implementation of the roadmap, but 
partisan legislation put forward today would likely undermine 
U.S. regulators' ability to actually work with the FSB. If 
Republican legislation prevents our regulators from engaging in 
these conversations, we risk being left out of the global 
economy.
    Dr. Gibson, my first question is for you. Chair Powell said 
here in the Financial Services Committee that, ``The status of 
the dollar as the world's reserve currency is a very important 
thing to us.'' Do you agree with him?
    Mr. Gibson. Yes.
    Mr. Nickel. And do you agree that U.S. regulators, like the 
Fed, should be involved in international conversations with the 
FSB and G20?
    Mr. Gibson. Yes. We benefit from those international 
discussions.
    Mr. Nickel. And how do we benefit?
    Mr. Gibson. We are able to influence the discussion in the 
international groups in a way that supports our objectives of a 
strong U.S. economy.
    Mr. Nickel. And if the Congressional Banking Regulation 
Priorities and Accountability Act that was noticed for this 
hearing were enacted, what implications would that have for the 
Fed?
    Mr. Gibson. I haven't looked at the details of the 
legislation. We would be happy to look at it and get back to 
you.
    Mr. Nickel. Next to you, again, Dr. Gibson, how does the 
Federal Reserve plan to collaborate with other U.S. regulatory 
bodies and international counterparts to maintain the dollar's 
influence in these discussions?
    Mr. Gibson. When we participate in the international groups 
you mentioned, like the G20 or the FSB, that are talking about 
issues like cross-border payments, we work with the other U.S. 
participants. In the FSB, it is the Federal Reserve, Treasury, 
and the SEC, and we would all work together to support the goal 
of a strong dollar.
    Mr. Nickel. And what benefits would the U.S. lose if the 
dollar were no longer a global reserve currency?
    Mr. Gibson. You mentioned some of the benefits already, 
which is that it strengthens our economy. It allows our debt 
markets to be very liquid, which has benefits across our entire 
economy.
    Mr. Nickel. Chair Powell was recently here. He talked a lot 
about interest rates and where we are as an economy. If you 
would like, you are welcome to say, ``soft landing,'' a few 
times. If you want to take that opportunity, please, by all 
means go ahead.
    Mr. Gibson. I can't comment on any monetary policy.
    Mr. Nickel. I think the gist of my conversation with him 
afterwards is he was never going to say those words either just 
because it is a jinx, but I am pleased at where we are heading 
and yield back the balance of my time.
    Mr. Nunn. [presiding]. I now recognize myself for 5 
minutes.
    I want to thank the witnesses for being here in front of 
this committee today. You are all entrusted to be independent 
in protecting the strength of the American economy in your 
respective agencies. However, in my short 14 months here as a 
freshman Member of Congress, I have witnessed continuous 
politically-charged decisions and, I would offer, backroom 
discussions that have left many folks out, including members on 
this committee on both sides of the aisle, as well as folks 
back in my hometown. I believe that we should all agree at the 
forefront that folks in Altoona, Iowa, should have a much 
larger say in our future economic success than modeling a 
regulatory structure that is being decided in Brussels, 
Belgium.
    With that, in January, I led a bipartisan letter to your 
agencies, along with a Senator from Kansas, Jerry Moran, who 
emphasized the impact of increasing bank capital requirements 
on the economy and the impact on our constituents, particularly 
those in the agricultural community. It was signed not only by 
bipartisan Members of this committee in the House, but also in 
the Senate. I was happy that the Fed at least acknowledged that 
we sent the letter over. And while you didn't provide any 
detail in here other than an acknowledgement that you received 
the letter, I am still waiting to hear from the other two 
agencies, who have just turned a blind eye to responding to 
this committee. That is disappointing, so let me be clear: The 
actions of your agencies are hurting families back in small 
towns in Iowa as well as in large communities across the 
country.
    Director Gibson, your boss at the Fed stated that the Fed 
will make substantial changes to the final Basel III proposal. 
Is it correct that the next draft includes concerns that my 
farmers voiced months ago?
    Mr. Gibson. We have heard those comments, and they will be 
reviewed as we work on the final rule, yes.
    Mr. Nunn. The follow-up then is, could these end-user 
concerns or other concerns have been mitigated if you had 
listened to them on the front end of this?
    Mr. Gibson. We go through a public comment process 
precisely to make sure that everyone has the opportunity to 
comment, so we are getting those comments now, and we are 
carefully reviewing them.
    Mr. Nunn. For all of the panelists, I just want to be clear 
here. Would you agree that U.S. stakeholder input on the front 
end of these decisions is important for you to be able to 
execute on the backend when you make these decisions? Can I get 
a verbal yes or no?
    Mr. Billingsley. Yes, I think it is important. That is the 
purpose of the rulemaking.
    Ms. Gardineer. Yes, it does support the rulemaking process.
    Mr. Nunn. I agree.
    Mr. Gibson. Yes, that is part of our rulemaking process.
    Mr. Nunn. Good. I hope that we continue to have that before 
rather than after, and now I want to talk about 
competitiveness. Right now, we are holding American companies 
to international regulatory standards when, despite this action 
by the current Administration, our economy remains the envy of 
the world. In fact, the U.S. has 4.4 percent of the world's 
overall population. As we all know, we have over 50 percent of 
the equities and debt raised in the world.
    So for each of you, if the world comes to us for capital 
market solutions, then why do we continue to look to Europe as 
the leader when it comes to its financial markets? This is not 
a rhetorical question. It is one that we are currently engaged 
in. And why are your bodies imposing more-stringent standards 
on an American company when our international peers implement 
the minimum recommendations for global standards, as we have 
seen time and time again?
    Mr. Gibson. We are proposing rules like the capital 
proposal based on our domestic statutory mandates, and that is 
what we consider. And we have received the comments and we are 
evaluating those.
    Mr. Nunn. Mr. Billingsley?
    Mr. Billingsley. I think, to Mike's point, we are trying to 
implement rules in the United States that are fit for purpose 
here, but the comment process is critically important.
    Ms. Gardineer. As we engage in the rulemaking process, 
Congressman, I think we take into account the particularities 
of the U.S. financial system in proposing and then receiving 
comments that we take into account before we move forward to 
finalize any rule.
    Mr. Nunn. Just as a quick reminder for all of us here, the 
U.S. economy continues to lead because of the great success of 
the American enterprise, and including that of the rest of the 
world continues to follow our lead. Perhaps, we should 
emphasize the fact that we are leading in this area and not 
continue to restrict in this area, in my feelings, very 
arbitrarily. I remain concerned that if we continue on this 
path, every agency will be a climate regulator in 5 years, 
across-the-board here.
    Director Gibson, is it consistent with the Federal Reserve 
to say it is not a climate policymaker while simultaneously 
being committed, throughout the Fed's work, that furthering the 
NGFS goals amounts to a climate policymaking regime?
    Mr. Gibson. The Federal Reserve is not a climate 
policymaker. We have responsibility for bank supervision and 
bank safety and soundness, and we only take climate-related 
financial risks into account to the extent they interact with 
our existing mandate.
    Mr. Nunn. My time has expired. At this point, I would like 
to thank Dr. Gibson, Mr. Billingsley, and Ms. Gardineer for 
your testimony today. I know this has been a long process, and 
I appreciate you all being here.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.

    The hearing is now adjourned. Thank you.
    [Whereupon, at 12:37 p.m., the hearing was adjourned.]
    
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                             March 21, 2024`