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WASHINGTON — Federal regulators first warned in their annual report to Congress on Friday that climate change is an “emerging threat” to the U.S. financial system, revealing how the costs associated with more hurricanes, wildfires and flooding caused by global warming could be . causes a series of damage to the economy.

The Financial Stability Oversight Council, a group of top financial regulators led by the treasury secretary, gave a stern assessment of how the fallout from rising temperatures could spread, damage property values ​​and severely aggravate industry-linked insurers, banks and pensions. casualties. The report follows a similar climate risk analysis the council released in October.

“The increased frequency and severity of acute physical risk events and long-term chronic events associated with climate change are expected to lead to increased economic and financial costs,” the new document said.

However, the report fell short of the kind of policy prescriptions demanded by environmental groups and progressive Democrats, such as stricter rules that require banks to assess their ability to withstand climate-related losses, new capital requirements, or restrictions on funding fossils. fuel companies. Instead of Reiterated a number of recommendations from the October report It called for better data to assess climate-related financial risks and more uniform disclosure requirements to help investors make more informed decisions.

No mention of climate change by the Trump administration last year final FSOC report.

The climate change warning was one of several threats to the financial system, which has faced lingering uncertainty for nearly two years and a global pandemic that has been taken over by a new variable.

In its annual report, the panel warned of the risk of higher-than-expected inflation, arguing that this would lead to higher interest rates and losses at some financial institutions and dampen the momentum of the recovery.

The report comes as the Federal Reserve said this week accelerate the end of the monthly bond-buying programused to raise interest rates three times next year to support economic growth and fight inflation during the pandemic.

FSOC regulators attributed inflation in advanced economies to “a rise in commodity prices, supply chain disruptions and labor shortages.” They warned that a rapid or unexpected rise in interest rates could blunt rising prices, which could trigger “sharp contraction forces” and acknowledged it was unclear how long inflation would continue.

“The emergence of higher inflation also raises the question of whether the long-term inflation expectations of households and businesses will rise or stabilize,” the report said.

The trajectory of the global economy is also a concern, as lockdowns and downturns in other countries could spill over into the US financial system. Regulators noted the possibility of a “hard landing” in China as a potential concern, noting that the Chinese real estate sector is “heavily leveraged”. As China is a huge consumer of steel, copper and iron ore, a slowdown in the real estate market could hurt global commodity markets.

The report also highlighted the fact that the pandemic has brought about changes in the economy that are hard to grasp.

The FSOC is watching the commercial real estate industry closely, for example, with concerns that the rise of teleworking could permanently drive demand away from urban office space. If this shift at some point leads to a rapid decline in valuations, it could deal a blow to small and medium-sized banks holding real estate loans and destabilize the financial system.

Corporate credit also remains a concern, as leverage in non-financial companies is high compared to historical levels. Regulators are watching the airline, hospitality and restaurant industries that have been hit hard by the pandemic and warned that a wave of defaults or discounts could be difficult for the financial industry to digest.

The financial system is also facing a number of new threats.

Digital assets known as stablecoins potential source of vulnerabilityregulators added that more coordinated oversight is needed as the industry evolves so quickly. They said the value of digital assets remains highly volatile and may be subject to “risk of operational failures, fraud and market manipulation”.

The new technology could pose risks to the wider financial system if investors in digital currencies are suddenly unable to cash them out. Regulators also said that stablecoins could pose risks related to cybersecurity and illegal finance.

The FSOC does not have the power to write rules, but it can encourage regulators to address market weaknesses and has the power to designate certain assets or activities as “systemic” and in need of tighter control.