Scott Dance reported from Washington, and Stacy Cowley from New York.

Federal regulators have rescinded a requirement that the nation's largest financial institutions factor climate risks into their long-term planning, a policy dating from the Biden administration that Federal Reserve Board staff called "distracting" and "not necessary" and that Republicans have labeled overreach.

The Fed and the Federal Deposit Insurance Corporation said Thursday that existing requirements that banks "consider and appropriately address all material financial risks" were sufficient to protect the financial system from the shocks of intensifying heat waves, droughts, storms and floods.

It was the latest erasure of climate change from federal policy as the Trump administration seeks to boost fossil fuel industries and domestic energy production. The F.D.I.C. board is composed of Trump appointees, including Russell Vought, the White House budget director, who has attacked concerns about climate change.

Critics warned the change could cost the U.S. economy in the years ahead.

Earth's average temperatures have risen more than 1 degree Celsius, or 1.8 degrees Fahrenheit, over the past two centuries as a result of the burning of fossil fuels and the greenhouse effect, according to an extensive body of research and a vast majority of scientists. While that may seem like a modest increase, every fraction of a degree has led to more extreme weather that destroys property and crops. As greenhouse gases surge faster than ever measured, researchers have estimated that continued warming could cost the global economy more than $38 trillion each year in the coming decades.

The Fed and the F.D.I.C. joined the Office of the Comptroller of the Currency, another banking regulator within the U.S. Treasury Department, in jettisoning the rule. That office said in March it would no longer honor the policy.

It was not the first recent change to how the corporate and financial sectors are being asked to consider climate change impacts. The Securities and Exchange Commission last year adopted rules governing whether and how public companies should disclose climate-related risks to investors. An earlier version of those rules had included extensive requirements for companies to report the fossil fuel emissions tied to their business activities, but it was watered down after opposition from Republicans, the energy industry and farmers.

The federal banking agencies adopted the climate risk guidance in October 2023, applying it to banks with more than $100 billion in assets. At the time, the Fed chair, Jerome H. Powell, said the guidance was "squarely focused on prudent and appropriate risk management." Industry trade groups, including the American Bankers Association and the Bank Policy Institute, submitted comments and weighed in on the nuances.

That year, the Bank Policy Institute, a nonpartisan organization that represents the nation's leading banks, said its members were "devoting substantial resources" to managing climate-related financial risks. On Friday, the group welcomed the decision to eliminate the climate risk requirement.

"Banks already manage climate risk as part of their existing risk management frameworks," Austin Anton, a spokesman for the trade group, said on Friday. "This guidance was not additive; it was redundant."

The American Bankers Association did not respond to a request for comment.

"Certainly the political mood has changed in Washington," said Ian Katz, managing director at Capital Alpha Partners, a policy research firm.

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While the policy did not set specific requirements on how the banks should factor in climate risks, it demanded that they do so in some form across various aspects of their businesses.

"It was helpful to have the government saying, 'We didn't care how you were doing it, but you had to do it,'" said Laurie Schoeman, who worked as a senior adviser on climate risk and resilience in the Biden administration.

But the initiative had alarmed Republicans, who said the Fed was overstepping its congressional mandate to maintain stable inflation rates and a strong job market. The Fed cited such concerns when it withdrew from a climate-focused network of global central banks in January, days ahead of President Trump's second inauguration.

In individual statements alongside the announcement, Federal Reserve governors were divided on the rescission of the policy.

Michelle W. Bowman, the Fed's vice chair for supervision, and Christopher J. Waller, both board members nominated by Mr. Trump, defended the decision. Ms. Bowman said guidance that banks consider climate risks beyond their "typical strategic planning horizon" invited "highly speculative" analysis that would be "of limited or no utility."

Mr. Waller offered two words in support of the change: "Good riddance."

But Michael S. Barr, whom President Joseph R. Biden Jr. nominated to the board, expressed fear of "significant economic and financial consequences" without proper planning for climate risks.

"Ultimately, weaknesses in how a financial institution identifies, measures, monitors and controls the risks associated with a changing climate could adversely affect a financial institution's safety and soundness and financial stability," he wrote. "Revoking the principles as climate-related financial risks increase defies logic and sound risk-management practices."

Lisa D. Cook, a Biden nominee who remains on the board after the Supreme Court temporarily blocked her firing, said she expected that large banks wouldn't stop considering weather-related risks just because they were not required.

Fed Rescinds Mandate That Banks Plan for Climate Risks