According to a top Federal Reserve official, financial regulators should require the nation's largest banks to take new efforts to address climate-related risks as part of a broader effort to monitor potential financial system hazards.

Fed Governor Lael Brainard described how the central bank is poised to increase its assessment of the growing hazards posed by climate-related events such as natural disasters and wildfires, which could deliver unexpected shocks to the economy and markets.

“Ultimately, I anticipate it will be helpful to provide supervisory guidance for large banking institutions in their efforts to appropriately measure, monitor and manage material climate-related risks,” she said in virtual remarks at a conference Thursday on banking supervision hosted by the Federal Reserve Bank of Boston.

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Ms. Brainard's statements are noteworthy in part because she is viewed as a possible contender to succeed Randal Quarles, the Fed's vice chairman of bank supervision, whose tenure expires next week. Ms. Brainard is also a possible successor to Fed Chairman Jerome Powell, whose tenure expires early next year.

“Climate change could have profound consequences for the level, trend growth and variability of economic activity over time,” Ms. Brainard said. The coronavirus pandemic “is a stark reminder that extreme events can materialize with little warning and trigger severe losses and market disruptions,” she said.

Unlike central banks in the rest of the world, the Fed faces a tricky balancing act navigating its role on the issue because the US political establishment hasn’t achieved any consensus over how or whether to address climate change.