Climate Change Financial Risk Act of 2025

Key Points

• This bill requires the Federal Reserve to run 'stress tests' on the nation's biggest banks to see if they can survive financial shocks caused by climate change. This includes physical risks like floods and wildfires, as well as 'transition risks' like the world moving away from fossil fuels and toward renewable energy.
• A new group of scientists and economists would create three different scenarios for the future, ranging from mild warming to more extreme temperature rises. Experts would use these scenarios to predict how much money banks might lose if the climate or the economy changes quickly over the next several decades.
• Banks with more than $250 billion in assets would have to take these tests every two years. While there are no penalties for the first few rounds, banks would eventually have to create 'resolution plans' to show they have enough cash on hand to handle these specific climate-related risks.
• If the Federal Reserve rejects a bank's climate plan, that bank could be blocked from paying out dividends to its shareholders or buying back its own stock. This rule is meant to ensure that banks keep enough money in their vaults to stay stable and keep the economy running during a climate-related crisis.
• Smaller banks with at least $10 billion in assets would not face the full tests but would participate in surveys. These surveys help the government understand how prepared the broader banking system is for climate-related disasters or shifts in the energy market without putting too much paperwork on smaller local institutions.